The blog takes a different look at my theory that CME S&P Case Shiller home price index futures might be clearing at discounted prices to expectations.
A recap has been posted of trading in the CME S&P Case Shiller home price index contracts. It was a slightly busier month with 18 contracts traded, but prices, spreads, did not move much.
Longer-dated CME Case Shiller home price index futures appear to have a core bias (reflecting an imbalance between natural longs and shorts) that might be of interest to speculators from the long side. I offer my rationale, and two ways to trade the conclusion.
Recap of activity in CME Case Shiller home price index futures for August
Case Shiller index results were weaker than expected by recent CME contract prices.
Affordability measures become more sensitive when interest rates are very low.
Activity in the S&P Case Shiller home price index agreements was quiet during July. I've posted 20-page recap of activity on the CME, and my efforts to generate interest in OTC trades. #realestate, #housingderivatives, #homeprices, #CME, #caseshiller
Canadian home price index hedging seems possible using the same HPHF approach I've tried to use on US cities. Canadian index values, and home prices, present unique challenges as some prices are already headed lower, are more volatile, and are impacted by political forces beyond supply and demand.
CME Case Shiller price moves over the last year suggest that there are trading opportunities both as to outright home price index levels, as well as between regions.
AEI has raised the bar home price forecasting by providing housing data in a free, centralized platform.
While CME futures allow readers of Fitch housing outlook to express forward views on home prices in some regions, this "Part 2" blog shows how they might express views on the other ten cities (or many more) using an OTC housing derivatives.
A recent Fitch report says that Las Vegas is the most over-valued city (of 20 citied). CME Case Shiller home price index futures (housing derivatives) allow users a way to express their support (or not) of Fitch's views.
Zillow say home prices have peaked in 14 large cities. Would you like to sell any of them (including some where forward home price derivative markets trade at a premium to spot)?
Here's a recap of activity in the CME Case Shiller home price index futures and options for May 2019. A quiet month both as to volume and price changes.
Today's Case Shiller home price indices produced five "surprises" (defined as situations where index values were outside the bid/ask spread on the expiring CME Case Shiller futures contracts. Longer-dated contract prices are higher today in 9 of 11 regions.
Tariffs will likely impact the economies of port cities with repercussions to employment and home prices. I've posted quotes for 4 CME contracts and 4 OTC home price index agreements, to prompt discussion on the question of how much home prices might be impacted.
Should Boston home price futures markets trade at such a premium to spot -versus where NYM is offered. A review of the strongest and the weakest of the ten CME S&P Case Shiller regional contracts that share much expect forward outlook.
Volatility seems to drive volume higher in home price derivatives.
Yes, I’m going to pile on to social media efforts to capitalize on Super Bowl interest. Of course what I have in mind is here is getting readers to debate which side they prefer of the current pricing that has the CME Case Shiller BOS contracts outperforming the LAX contract (using the X20/ Nov 2020 expiration) by 2 (percentage) points. In addition I want to illustrate how one might look at intercity spreads, to new readers.
Suggested levels for OTC agreements on "Second 10" Case Shiller indices, for Feb 2020 expiration.
Quotes for puts on Case Shiller home price index futures have been updated. Prices continue to drift lower as futures rally.
I imagine that one of the biggest challenges facing a first-time home buyer (and their real estate agent) is the binary leap from 100% rent to 100% buy. Such a jump is often the biggest financial decision that people have to make. With new homes costing $400-750,000 in certain markets, this is a decision that involves a multiple of annual income. How can the upcoming wave of Millennials get comfortable that they’re making the right decision when looking at homes?
I've posted a recap of activity in the CME S&P Case Shiller home price index contracts for Q1.
The CME Case Shiller home price index futures are about unchanged (at an aggregate level). The table below illustrates quotes for the Nov '19 expiration (X19) for the ten-city index contract (HCI) as well as the ten regional components. Bids, Asks, and Mid-market levels are shown from late yesterday and earlier this morning.
This blog is a set of answers to FAQs related to the question -"How do I get started trading Case Shiller contracts".
Looking to jump-start Seattle home price hedging agreements.
Might yesterday's Fed announcement to leave rates unchanged, justify higher home prices, and therefore higher (short-term) CME Case Shiller futures?
I’ve created an entity called Home Price Hedging Fund (“HPHF”) to facilitate OTC trading in home price indices. While I remain of the view that the CME platform is the most transparent, pure-play on forward home price indices, I have received a number of requests from readers looking to express a view on home price indices not referenced by the CME Case Shiller contracts. HPHF was created to try to serve those readers’s needs.
Quotes on CME Case Shiller home price index futures have tipped over toward being consistent with negative HPA in 2019 for five of the ten regions (NYM, CHI, LAX, SDG, and SFR). Of the other fiver regions none are much above zero HPA, with BOS, DEN, and WDC just below 1%. Only BOS and LAV are priced for more than 1% gains against today’s spot levels.
I’ve compiled an interesting set of data that I’ll use to illustrate how the CME S&P Case Shiller home price index futures have traded over the last 7+ years. It may help traders understand how to better trade the contracts, as well as quirks within the contracts. I will be blogging about over the next few weeks, to include an analysis the robustness of contract prices in forecasting, contract biases, and volatility. I’m open to ideas on what readers might want to see, and would be open to slicing and dicing the information to address any longer-term questions.
I’ve posted quotes at the CME for puts on the ten regional Case Shiller home price contracts (and the 10-city index) that expire in Feb 2020. Recall that these options will settle on the value of the Case Shiller index released that month, and that that index references data through year-end 2019.
Many home price analysts noted that today’s Case Shiller indices continued to record year-on-year (“YOY”) gains. While YOY gains are a great way of addressing seasonal issues, and take on a more “over time” perspective, a fixation on YOY gains may hide turns in the market.
While the CME Case Shiller contracts cover many of the largest cities, I frequently get asked about hedging either other regions, or more narrowly defined geographic areas with the ten traded Case Shiller regions. I believe that, in concept, OTC trades can be structured between two willing, informed parties, that will allow a user to hedge any index, using forwards and options.
Redfin recently published a great piece that detailed how some residents look beyond their local area for their next house. They noted that many many people in a region look at the same next cities (sorted both by in-state and out-of-state searches) with certain marked preferences. For example, many LA residents eye San Diego, New Yorkers frequently consider Boston, and Denver homeowners seem to covet Seattle’s low taxes.
Las Vegas home prices have the tailwinds of population growth and the headwinds of accessing sustainable water supply, adding to the debate over future home price forecasts.