The Nov '22 CME Case Shiller futures contract should frame two sets of headlines for Tuesday morning when the indices are updated. One view is that there have been backward looking year-on-year price gains. The other, will show that index values have already fallen from the numbers released in August. Keep an eye on CME futures, as prices are consistent with further large price declines.

Tuesday's update of Case Shiller indices were higher (in some cases much higher) than the quotes on the expiring Nov 2022 (X22) contract. In response, longer-dated contract prices rose. The Case Shiller numbers (both prices and pair counts) are consistent with a less severe sell-off in home prices.

The Feb 2022 contracts settled on today's Case Shiller #'s. Many fewer outliers that in previous quarterly expirations. More work to do before I can comment on the impact of updated indices on longer-dated CME contracts.

The Feb '21 Case Shiller home price index futures end trading on Monday, and will settle on index values released on Tuesday.

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.

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carry those patterns into adjustments in future years -even when the fundamentals that caused the outlier results, are no longer applicable.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?!?

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.

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

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).

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.

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.

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.

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.

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.

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.

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

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.

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

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.

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.

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?

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.

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.

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.

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.

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.