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CME quotes Post Case Shiller index update

Prices of CME Case Shiller home price index futures popped today (Tuesday Oct 27) after the monthly indices were updated.

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Revisiting options on Case Shiller indices

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.

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Market Changes since Aug 31

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.

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Recap of Activity in CME Case Shiller home price index futures: Sept 2020

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

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Recap posted for activity in CME Case Shiller home price contracts for August

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.

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Different Cities -different levels where home price risk clears

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.

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Recap of August Case Shiller numbers, impact on markets

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

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Name one city to go long and one city to go short - mechanics and impact of any existing forward views

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.

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Where might home prices be headed through 2020 year-end

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.

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Why Home Prices might fall YOY

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).

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Recap of activity in July

I've posted a recap of activity in the CME Case Shiller home price futures contracts for July.

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Aug '21 clearing levels, calendar spreads, benefits of third party activity

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.

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CME Markets post July CS #'s

CME Case Shiller home price index futures are slight lower in price this morning after today's CS #'s. Bid/Ask spreads on the Aug '20 (Q20) contract have tightened (with one month until expiration).

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Adding/Reducing exposure to home prices in Portland and Seattle

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).

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The shortcomings of (backward-looking) YOY analysis on home price indices. Why CME Futures might be a better forecasting tool.

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.

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Recap of Activity for June in CME Case Shiller futures

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.

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CME Case Shiller futures higher -post updates to indices

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.

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How to express a view on the Summer Selling Season of 2020

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.

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Having retraced sell-off, what can be done with Case Shiller 10-city and other home price indices?

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.

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May recap posted on CME Case Shiller futures

I've posted a recap of activity in the CME Case Shiller home price futures contracts for May. Prices surged on low volume.

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Any bulls (or even status quo fans) on SFR?

Creating a deep in-the-money call.

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0 'fer -May 20 expirations

The May '20 contracts settled on higher numbers that the bid/ask spreads on Friday indicated. The strength of the CS #'s has lead me to raise quotes on Aug, Nov '20 and Feb '21 contracts.

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May '20 expiration approaching -What will be impact of COVID?

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.

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Shorter Expirations puts for any index

Options can be created on any home price index. Shorter-expiration, near at-the-money strikes work best.

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Will Dallas real estate rebound quicker than the rest of the country

I've posted ideas on how one might one hedge the performance of Dallas home prices, relative to a more national index.

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Recap of CME Case Shiller activity during April

I've posted a recap of the historic activity in the CME Case Shiller home price index contracts for April.

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April Case Shiller #'s. On to an uncertain May

April Case Shiller numbers confirmed recent strength, but now with them out of the way, the debate about the impact of declines in housing activity in March, on the May 2020 contract, has begun to ramp up.

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Introducing Relative Performance Agreement Quotes

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.

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Intermediate Expirations (Feb 2023, G23)

I'm think that Feb 2023 should take over as the new benchmark contract. It sits between the Feb '21 and "25 contracts that i've touted before, and should reflect conditions in the post-COVID new normal world.

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Hedging Minneapolis

How to (better) hedge regional exposures that are not referenced by CME Case Shiller index futures.

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Do you think home prices will be higher 5 years from now?

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.

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A Third Dimension: Generating Regional Quotes from HCIG21 and IC spreads

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.

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Two Dimensions of Trading CME Case Shiller Futures: Absolute Level and Path of Home Price Recovery

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.

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Why might Case Shiller futures clear at a discount to expectations?

I provide a stand-alone blog to capture different themes supporting my view that CME Case Shiller home price index futures clear below expectations.

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The basics of hedging home prices from the long side

Given the change in CME Case Shiller home price index contracts, it's time to review the basics of a long home-price hedge.

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A day of reckoning for home price futures

Quotes on CME Case Shiller futures are dramatically lower over the last two days. The selloff was most pronounced in shorter-term expirations (e.g. Aug '20-Feb '21).

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Recap of CME Case Shiller futures activity during March

Here's a recap of activity in the CME S&P Case Shiller home price index futures during March

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Week 4 of March. Volatility update and logistical issues

Activity in the CME Case Shiller home price index contracts, with a focus on the last week.

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Convergence -Why the press should add futures to their monthly Case Shiller recaps

Convergence gives credibility to CME Case Shiller contracts having some element of expectations. Here's what the contracts are "saying" on six regions.

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What a difference a month makes! (Feb 21 v Mar 20)

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.

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A new section to aid price discovery

I've added a page to my website to help users get a sense of either where I'd buy/sell CME Case Shiller home price index futures, or where I see activity from other users.

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The positive role of housing derivatives

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.

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A review of Intercity Spreads in 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.

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Price Discovery

Markets need price discovery to thrive. Here's my effort related to home price index futures.

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The impact of C-Virus on Home Prices/ Las Vegas

What should the impact of C-Virus be on home prices, and in particular,Las Vegas?

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Looking Forward (as opposed to focus on data releases)

Why only incorporate backward-looking data into home price forecasting when there's a public market on forward home prices?

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Expiring Feb contracts

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.

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Relative value across regions

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).

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Transition to February expiration cycle

Case Shiller home price index futures can now be traded across multiple February contracts.

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Recap of Jan Activity in CME Case Shiller futures

Recap of activity in CME Case Shiller futures during Jan 2020.

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Post Case Shiller #'s, New Benchmark Expiration -Feb '21

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.

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Trading Nov '22 during two week transition to new expirations

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.

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Using Calendar spreads to weigh in on 2020 HPA debate - a review and opportunities

CME Calendar Spreads may be useful for either expressing a view on HPA, for 2020, across ten regions.

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Where are home prices headed in 2020 -The power of markets to complement historical analysis and opinions

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.

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Dec recap posted

Trading volume in the CME Case Shiller futures hit a 5-year high, but that still is only a fraction of what's possible, needed, and/or the volumes traded in 2006-07.

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When forecasts diverge - NAR outlook vs HPHF quotes

An illustration of how users might hedge if they are worried about negative forecasts on home prices.

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What drives home prices- mortgage rates or stocks?/ An opportunity?

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.

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Recap posted of activity in CME S&P Case Shiller home price index contracts

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.

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CME S&P home price index futures -post this morning's release of Case Shiller index values.

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.

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CME Case Shiller Futures approaching Nov 26th expiration: Convergence and Forecasts for Tuesday

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.

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An open letter to NAR Expo attendees

An open letter to attendees at NAR Expo @narannual suggesting that taking bite-sized exposures may be preferable to 100% Rent v 100% Buy v 100% Sale decisions their clients currently face.

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Let's connect before/after AEI event in NYC, Tuesday Nov 12

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.

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Oct Recap of activity in CME Case Shiller contracts

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).

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Reaction of CME quotes to updated Case Shiller #'s

CME Case Shiller futures are lower after the release of the monthly home price indices. All contracts are flat to lower, except MIA.

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Home Price Index Agreements -some examples

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.

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CME Markets and 2019/ 2020 Forecasts for Case Shiller home price indices

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.

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Are CME Case Shiller quotes inconsistent with sentiment (#2): Core Logic forecast?

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.

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September recap of CME Case Shiller activity posted

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.

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CME Futures: Expectations vs Clearing Levels, Opportunity or Bias?

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.

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Options_Feb 21 Puts introduced

Prices for puts on the CME Case Shiller home price index futures are now available for the Feb 2021 contract.

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August Recap of activity in CME S&P Case Shiller home price futures

Recap of activity in CME Case Shiller home price index futures for August

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Recap of CME Case Shiller markets post this morning's #'s

Case Shiller index results were weaker than expected by recent CME contract prices.

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The challenges of affordability measures at very low interest rates

Affordability measures become more sensitive when interest rates are very low.

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July recap of activity in S&P Case Shiller home price index contracts (on CME)

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

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Post Case Shiller #'s (July 30)

Case Shiller home price index futures (housing derivatives) are slightly lower this morning after CS #'s.

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Hedging Canadian Home Price Risk

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.

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Regional disparity -a review of price moves over the last 12 months

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.

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June Recap posted

Recap of June activity in CME Case Shiller home price futures and options. June saw first put trades of 2019. Also Paris home price futures launched.

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AEI information platform centralizes data for analysis of regional home price indices

AEI has raised the bar home price forecasting by providing housing data in a free, centralized platform.

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Review of Fitch report (Part 2) - regions not referenced by CME contracts

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.

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Using InterCity Spreads to take views on Fitch report -Part 1 (CME Futures)

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.

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Paris home price index futures launched

Euronext started trading home price index futures on the City of Paris using a new index.

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Zillow -14 cities where home prices have peaked?!?

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)?

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Activity in CME Case Shiller home price futures for May

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.

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CME reaction to today's Case Shiller #'s

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.

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May '19 contract expiration

The May 2019 Case Shiller home price index futures stop trading today. Current prices suggest that Tuesday headlines will read "Home Prices gain but at slowing HPA" and "LAV leads ten-city index components.

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The impact of tariffs on home prices?

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.

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Texas: Home Price Index Agreements

Levels for home price index agreements via HPHF for five Texas cities

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Seattle index value in Feb 2020?

Trying to jump-start Seattle home price index agreements. Have posted levels for housing derivatives on Case Shiller index.

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Northeast markets: Opportunity or message?

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.

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Volatility creating trading opportunities in CME home price contracts

Volatility seems to drive volume higher in home price derivatives.

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CME Case Shiller Futures post #'s

Recap of CME Case Shiller futures post CS #'s this morning.

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Should Boston over LA be 2 points?!? -Super Bowl special (IC spreads)

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.

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