Post Feb #’s -Market Color

The CME home price futures were relatively quiet after this morning’s release of the December Case Shiller #’s.

The first table below shows a comparison between the Feb CME markets from yesterday and today’s #’s.  Note that there were four regions (CHI, LAV, LAX and SDG) where the index results were higher than the offered side the day before, and three regions (MIA, SFR and WDC) where the index results were lower.  (I’ll refer later to these as “surprises”.)  However these outliers tended to offset each other as the 10-city index value printed today was within 0.1 of the mid-market value for the HCI (10-city) Feb ’16 contract.  With seven outliers profitable opportunities seem to still abound for those claiming to be able to predict Case Shiller values (even just one day forward).  I would note that making that exercise slightly more difficult, and contributing to WDC’s role as an outlier was a >1.0 point revision (lower) to last month’s WDC index.  I’ve noted before how of all the regions, WDC seems to be the one subject to the largest revisions.  Anyone got a clue what makes the WDC data gathering process different?

Feb before_After

Market reaction to longer expirations was muted.  The line below “One day price move” shows the change in the mid-market values between yesterday and noon today.  Regions that were negative “surprises” tended to be quoted slightly lower (e.g. MIA, SFR, and WDC) while regions that were upward “surprises” tended to be quoted slightly higher (e.g. CHI, LAV, and SDG).  The benchmark HCIX16 contract was -0.2 lower (the minimum price move).

Nov16 mkts post Feb 16 CS

Market activity has been extremely quiet with no other traders taking a lead in pricing of any contracts.  There have been no trades.

Finally, with the expiration of the Feb ’16 contract, the CME opened trading in the Aug’17 contract.  I’ve posted prices for the CUS (10-city index) contract, but will probably lay low on this contract for the near future until there is third-party interest.

As always, feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions.