CME home price index futures_post Case Shiller #’s

CME contract prices are marginally higher post this morning’s Case Shiller #’s (see Mid-Mid change in table below) with NYM up (on substantial revisions to the last month’s index values) while SDG remains under pressure.

However the change in prices over these two days is not the headline event here for the month, or even the week.  Contract prices have collapsed (e.g. with bids on SFR contracts beyond 2020 falling by more than 10 points, and offers lower by 6) somewhat in sympathy with the stock market “correction” (air quotes).  The increase in stock market volatility, and uncertainty about where that market will stabilize, has seen bid/ask spreads in this market widen across all expirations.  Most notably, as I wrote about in my Dec 21st blog  forward prices had begun to invert (i.e. forward prices lower than spot).  That trend has moved beyond the SFR contracts to most regions, and the degree of inversion has become more pronounced.

To be clear, most of these quotes are mine (although other traders are contributing to LAV, NYM and SFR contracts).  My approach has been to (try to) bias prices lower seeing as most inquiries are coming from people who now want to hedge.  The key questions for viewers of these quotes are: 1) is the decline in prices an over-reaction to the stock market,  2) will the inversion in the back end become much steeper if the S&P drops below 2300, and 3) which regions are going to be more/less impacted by demand for hedging and/or stock market decline.  I hope to write a blog latter exploring the parallels to the last housing crash with the idea of differentiating those cities that performed like Dallas in 2006-08 (almost unchanged), or that fell the hardest (e.g. LAV).

I’d appreciated feedback on market quotes, people’s views on forward prices, and ideas for trading.  Volatility often creates opportunities to get things done that might not happen in a more stable market.  Feel free to contact me ( if you have any questions about this blog, or if you’d like to brainstorm on the three questions posed above.

Thanks, John




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