The CME Case Shiller home price index futures seem to have awoken from their (one-sided) summer doldrums. There were 15 trades today across several regions. That resulted in tighter bid/ask spreads. I don't know whether this was someone's "New (school) Year's Resolution" or whether the debate on home price topping has been reached, but I'm open to facilitating any inquires.
Quotes on CME Case Shiller home price index futures soared on Tuesday after the monthly release of updated indices.
Are there any longer-term climate-related implications from the tragedy at Surfside, and if so, how might one express a view, without picking a top in prices?
HPHF Ratio trades might be a useful tool to hedge home price index risk exposure, to those cities that are not referenced by CME Case Shiller futures contracts.
I've posted a recap of the activity in the CME Case Shiller home price index futures for May 2021.
The reaction of the CME Case Shiller home price index contracts to yesterday's updates of the CS indices poses some questions for where contract quotes are headed.
May22 will be the 15th anniversary of the first trade in the CME S&P Case Shiller futures. I've pulled together a high-level recap of some key themes, which will be followed by blogs going into much more detail on six key phases of trading in these contracts.
I've posted a review of one might use different forms of home price index derivatives in hedging strategies.
I'm dusted off an old tool -candle bar diagrams -to convert bids and offers on forward prices into percentage gains (or losses) to make comparisons across contracts with wildly different notional values, a bit easier.
This morning's Case Shiller index updates were in line with quotes on the expiring (Feb '21) CME Case Shiller futures contract. Longer-dated market were up a small amount today in light trading.
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).
I've posted a set of graphs on the ten regional CME Case Shiller home price index graphs, that show the gains from last year, and forward prices. My standard illustration has been modified to also include suggested levels on options, to be written with HPHF OTC agreements.
The Jan 2021 recap of activity in the CME S&P Case Shiller home price index futures has been posted. Volume was only 12 contracts. Prices rose and bid/ask spreads tightened as third party interest increased. Option quotes and an offer to post levels on other cities, are included in the recap.
In December, the CME introduced the NASDAQ/Veles water contracts. I've tried to confine my social media to tweets (@CMEWaterFutures) but wanted to share one blog to bring this contract to the attention of my readers. Feel free to DM me with any questions. #water, #drought, #california, #climate, #coloradoriver
For anyone looking to express a view on Paris home prices, but who (possibly as a US citizen) is frustrated by the challenges of accessing the Euronext Paris contracts, I'm offering an OTC version of that contract, denominated in dollars.
Quotes on the CME Case Shiller home price index future surged after another strong month, with most of the gains in the 2021 contracts. Prices in the benchmark G22 contract were up 3-6 points. Bid/ask spreads are wider but I'll try to narrow them (somewhat) by year-end.
Once again, the release of a Pulsenomics home price forecast survey, seems to reinforce my belief that CME Case Shiller futures trade at a discount to expectations.
I have readers looking to add/reduce exposure to Paris home prices, but am challenged on how to structure such exposure. I'm offering a $250 reward for anyone who can introduce me to an FCM that will let me open an account to trade Paris contracts (traded on Euronext) and am looking for feedback on how to structure an OTC agreement.
This morning's Case Shiller indices resulted in higher CME Case Shiller home price index futures throughout the day. CHI and NYM indices were much higher than the offered side of the expiring Nov '20 contracts, but both indices had substantial revisions from the last month.
Be caution when reading seasonally-adjusted numbers in future years. Seasonal adjustment patterns seem to pick up activity in years with unusual price activity and carry those patterns into adjustments in future years -even when the fundamentals that caused the outlier results, are no longer applicable. Will the COVID have an impact on seasonal adjustment factors in the future?!?
The November 2020 contracts are expiring on Tuesday (with Monday the last trading day) after five years of service. I've posted this blog to take a longer term view of home price futures, to highlights changes in prices, and to illustrate convergence.
Options on home price indices (particularly puts) may be a preferred product for retail hedgers. However, quoting options can't move too far forward without a discussion that bounds assumptions on volatility. Here is my attempt to kickstart that effort.
With so many readers leaning toward more bullish outlooks, I suspect that they see little reason to hedge. Therefore, I've posted a set of quotes for Calls on the regional indices that constitute the Case Shiller 20-city index. Feel free to review, comment, and propose ideas.
Will the move from New York City to the suburbs continue? If so, I'd expect the Case Shiller NYM home price index to outperform the NY Condo index. I've proposed a #HPHF Agreement where one could express a view. Forward prices are consistent with slight out-performance of NY home price vs condos, but that may be due to trends that pre-date Covid.
October was a very quiet month for CME Case Shiller home price index futures. Users looking to hedge seem to be on the sidelines, while gains in indices continued to push contract prices higher. In the meantime, I've relaunched an effort on options on home price indices, have been refining how to quote Relative Price agreements, and am hearing more about interest in hedging in overseas markets such as Canada, England and Australia. Additional key words: home prices, mortgage, crash, bubble, mortgage, derivatives
I'm introducing new OTC options agreements on Case Shiller home price indices. The purpose of this program is to provide a hedging instrument against declines in home price indices, over a relatively short horizon (i.e. <2 years) that does not require the sale of the house to monetize gains. The agreements will be similar to the products that the CME stopped trading (e.g. cash settle) but will provide a cap on coverage. Keywords: bear, housing, real estate, crash, forbearance, foreclosure, options, puts, calls.
Quotes on the CME Case Shiller home price index futures have been moving higher, but on very limited volume. Home Price fundamentals (e.g. low inventory, low mortgage rates, increased wealth as stock market rallies) remain strong. Uncertainty (e.g. who will be the President, whether a vaccine will be created, COVID relief, and rules about forbearance) should all be more clarified in the next 30-45 days. All such themes seem to support higher home prices.
Prices on CME Case Shiller home price index futures rose in September, particularly in the two front contracts- Nov '20 (X20) and Feb '21 (G21). In addition there were many fewer quotes, and bid/ask spreads on the remaining markets were much wider. test Test Test
I've posted a recap of activity in the CME Case Shiller home price index contracts for August. The rolling 12-month volume exceeded 300 for the first time in > 5 years. Prices were higher and bid/ask spread contracted.
Expressing a view of the likely performance of one city versus another needs to incorporate the notions that : a) there may already be markets where home price index risk clears, and b) that those levels can vary from city to city. I illustrate an example using the 20 public Case Shiller indices, but the same can be done with any other top 50 city.
Case Shiller indices released this morning were lower than the bid side of the expired Aug '20 contract. These "surprises" have led to lower quotes on the benchmark Feb '21 home price index contracts. #homeprices #realestate
I've fleshed out details on how I would structure HPHF agreements, that would allow a user to go long an index on home prices for one city, while shorting the index on another, to express a view on expected relative performance over some fixed time frame.
Any debating where home prices will shake out for 2020 might consider both CME Case Shiller home price index futures, as well as HPHF Relative Performance Agreement levels. Pricing suggests that despite Covid, there are few bargains (i.e. contracts trading lower than last year-end's index values -other than CHI and LAV) and both the CME contracts, as well as HPHF RP Agreements suggest (today) that home price indices will be slightly higher on a YOY basis, across many of the 20 public Case Shiller indices.
Both home price bulls and bears will be right, if they get to define the measurement period. Longer-term, CME Case Shiller home price index futures are priced consistent with a relatively flat market over longer periods (such as year-end 2019 to year-end 2022).
CME Case Shiller home price futures, one-year forward, are offered a discount to spot. Are home prices headed lower after this summer selling season.
There seems to be growing uncertainty in how Portland and Seattle prices might be impacted by recent developments. HPHF Agreements might be one way to express a view on future home price index levels (or changes relative to a more national market).
Viewers looking for a sense of where home prices might be headed might be better served looking at CME Case Shiller futures, that on YOY changes to the Case Shiller index.
The front-contract CME Case Shiller home price index futures completed a more than 100% reversal from the March/April selloff in June. Longer contracts have also rallied but still trade at discounts to spot.
CME Case Shiller futures are higher today (June 30th) after the release of updated index values. My sense is that most of the gain is a contraction of the forward discount that contracts often trade to versus expectations.
The real estate market seems to be hoping that, for 2020, the spring selling season will get pushed to the summer. One way to express a view on home prices for summer 2020 (outright or relative to spring 2020) is the CME Case Shiller X20 (Nov 2020) contract.
Home Price index futures are back to levels last seen in February 2020. The blog offers ideas on hedging components of the Case Shiller 10-city index, as well as (via HPHF swaps) the "other ten" cities in the Case Shiller 20-city index, as well as other larger cities where price histories have correlated with the CS-10 index.
The May 2020 (K20) Case Shiller home price futures contracts expire on Friday. Bid/Ask spreads are still historically wide due to uncertainty of the impact of the COVID virus on housing activity during March.
I've posted ideas on how one might one hedge the performance of Dallas home prices, relative to a more national index.
HPHF Relative Performance Agreements both allow users to express a view on the forward performance of one regional index versus the Case Shiller 10-city index, but are also the foundation for hedging absolute price risk on cities not referenced by CME contracts.
Do you think home prices will be higher 5 years from now? If so, longer-expiration CME Case Shiller futures might be worth your attention.
Using HCI21 contract (for Absolute Price Moves) and Intercity Spread quotes (for Relative Price Performance Pricing) can be used to generate quotes in regional markets.
Trading CME Case Shiller futures involves at least two dimensions -outright price levels, and the path of home price recovery. Different tools are appropriate for each decision.
I provide a stand-alone blog to capture different themes supporting my view that CME Case Shiller home price index futures clear below expectations.
Given the change in CME Case Shiller home price index contracts, it's time to review the basics of a long home-price hedge.
Here's a recap of activity in the CME S&P Case Shiller home price index futures during March
Activity in the CME Case Shiller home price index contracts, with a focus on the last week.
Convergence gives credibility to CME Case Shiller contracts having some element of expectations. Here's what the contracts are "saying" on six regions.
Prices on the CME S&P Case Shiller home price index contracts have fallen dramatically over the last month. Attached are a series of graphs to show how much.
Housing derivatives can be useful for sharing either expectations for forward home prices, or in disclosing where risk might clear. Help is needed from this community to build depth in the Feb 2021 CME Case Shiller futures.
Intercity Spreads are a useful tool when trading CME Case Shiller home price index futures. IC trades allow users to see, or express views on, relative performance between two regions, or more often, a regional contact and the 10-city index.
Why only incorporate backward-looking data into home price forecasting when there's a public market on forward home prices?
The Feb 2020 (G20) CME Case Shiller home price index contract will cease trading at 3 PM today. Settlement will be based on the CS index numbers released Tues at 9 AM. The CME will then open a new May 21 (G21) contract, and I will also start populating quotes in the dormant Aug 2020 (Q20) contract.
Users can express views on relative value via Intercity ("IC") spread quotes. About half of the CME contracts are priced for gains above the 10-city index (e.g. BOS, WDC, DEN and LAV) while half are priced for under-performance (e.g. CHI, LAX, NYM, SFR).
CME Case Shiller futures were quoted modestly higher today, after the release of indicies that tallied activity through November. The BOS and WDC contracts saw the highest gains, while the NYM and SFR contracts declined.
With the CME announced change in expiration schedule, users may have concerns about open positions in the Nov 2022 (X22) contracts, as well as how to trade over the next two weeks -until new longer-dated expirations are open. This blog addresses both concerns.
CME Calendar Spreads may be useful for either expressing a view on HPA, for 2020, across ten regions.
Market can complement historical analysis and forecasts to help users form their outlook. The CME Case Shiller calendar spread markets might be a useful tool for forming views on where home prices are headed in 2020.