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.
An illustration of how users might hedge if they are worried about negative forecasts on home prices.
Home Prices may be impacted by mortgage rates and the stock market, but there are times when home price futures contracts don't seem to react. This may be one of those periods.
I've posted a summary of activity in the CME S&P Case Shiller home price index contracts for November. YTD volume is the highest in 5 years (although only a tiny fraction) of where is could/should be.
Today's Case Shiller indices included four "surprises", at least relative to users of the CME S&P Case Shiller futures. The BOS, CHI and SFR index values were below bid sides of the expiring Nov 2019 contracts, while the LAX index was above the offered side. Nov 2020 contracts referencing those indices moved in the direction of surprises, but in aggregate prices are about unchanged.
The Nov 2019 CME S&P Case Shiller home price index futures expire next week. Contract prices have converged with index values, and bid/ask spreads on the expiring Nov '19 contracts average <1.0 point.
I'll be attending next week's AEI Housing conference in NYC (Nov 12) and would be happy to arrange 1:1 meetings to discuss home price index hedging options.
A recap of activity in the CME S&P Case Shiller home price index contracts is available here. Prices were mixed, while 19 lots traded, in a very quiet market (at least versus stocks).
CME Case Shiller futures are lower after the release of the monthly home price indices. All contracts are flat to lower, except MIA.
Those with exposure to home prices (e.g. investors, builders, flippers, future buyers/ Millennials, retirees looking to downsize, people looking to move) might benefit from hedging. This blog describes a platform (Home Price Hedging Fund #HPHF) that with proposed quotes on OTC home price index agreements.
Case Shiller home price index forecasts for 2019 and 2020 can be viewed vs CME futures and calendar spreads. Housing derivatives might be useful for real estate analysis and hedging.
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.