Quarterly Pulsenomics home price survey

The results of 3rd quarterly home price survey by Pulsenomics have recently been released https://pulsenomics.com/Q3_2016_HPE_Survey.php.  (Disclosure – I am a survey contributor).

I have a few observations on the numbers (as shown in table below):

  • Mean/Median expectations for 2016 are much higher.  This may be a function of higher stock market, lower mortgage rates and low inventory levels.  It is consistent with the stories from Denver, Portland, Seattle and other hot markets.  While CME implied gains for 2016 have also been rising, 1) they reflect changes in Case Shiller index, not the Zillow index measured here, and 2) CME implied HPA (not shown here) is still lower than these survey results.  (In comparing surveys vs. markets – particularly a market where interest seems dominated by hedgers – I wonder whether surveys, by their nature, are more optimistic, while markets where one can hedge might be quoted below “expected” future levels (if there’s an imbalance of interest).
  • Pulsenomic HPA gains are front-loaded, and with the passage of 3 months, have lower standard deviations, while longer term HPA projections are essentially unchanged, but with slightly wider projections.  This seems consistent with recent comments in the press from economists (and the tone of political advertising?) expressing concern for the sustainability of home price growth.
  • Net, CME prices should translate into steeper calendar spreads on shorter expirations (which they have) and higher prices on longer-dated options (to reflect increase in standard deviation of expectations.)

Pulse Q3 2016 2

 

Feel free to contact me (johnhdolan@homepricefutures.com) on this blog or any other aspect of hedging home prices.