I've updated the template for Ratio Agreements to highlight the implied forward values for Feb '25-'27. There is also a section with housing economic news. Please review, critique and guide me to other metros that you'd like to see referenced.

This blog builds on the work of the last few blogs to demonstrate the process by which HPHF Ratio Agreements can be used with Freddie Mac home price indices, to infer forward clearing levels (not expectations) for the many cities not referenced by CME Case Shiller home price index futures. These Ratio Agreements can be used to hedge either relative risk, or if used in combination with CME futures on the Case Shiller 10-city index, some component of outright regional home price risk.

Key to an upcoming blog on Freddie Regional /Freddie National Ratio Agreements, is an understanding of how one might create a forward market-clearing level for the Freddie National index, or how the Freddie National index might relate to the Case Shiller 10-city index (which is referenced in CME futures contracts).

Here's an updated version (through Aug 8th) of both historical ratios (of regional index divided by 10-city index) as well as implied forward Ratio Agreement levels based on quotes in the ten regional contracts for Feb 2024 and 2025 expirations.

There are two ways that a reader can see the clearing level for the basis risk between one city and the Case Shiller 10-city index (InterCity Spreads on the CME, and OTC HPHF Ratio Agreements).

I've updated my template for how I show the components of HPHF Ratio Agreements (based on feedback from readers, that they wanted more information on what the numbers mean).

Despite low rent growth, the ability for the tech community to work remotely, and headline homeless issues, San Francisco home prices (SFR index) have matched those of the rest of the Case Shiiler 10-city index, and are priced to do so again in 2022.

A comparison of moves between regional and national home price indices reminds me to be cautious when relying on correlations over a sample with outlier moves, and consider all of the tools at your disposal, when looking to hedge a regional exposure to home prices.

I've used Nashville to illustrate how one can express views on the relative performance of a region vs. a more national index, as well as (when combined with futures) to express an outright view.

Addressing the risk of regional prices moving differently from national levels has become a bigger issue during Covid. I offer one way to address that risk using Pittsburgh as an example.

After illustrating how an HPHF Ratio Agreement might work for Atlanta, I've expanded the concept to show ratios for twenty cities.

Will the recent storms changes expectations on Texas home prices? Might owners in Austin, Dallas, El Paso, Houston, and San Antonio look to reduce exposures? Might there be anyone looking to eventually move to Texas who sees a dip in risk transfer prices as an opportunity.

How might Phoenix homeowners capture some of the bullish expectations without having to sell their homes? How might future Phoenix homebuyers get exposure to greater than expected gains in Phoenix home prices? Calls (and other options).