Over the last few months, I've started posting my forecasts for the upcoming Case Shiller release. This month, because August is an expiration month, I'm going to introduce two new wrinkles (and commemorate them in this blog for future templates.)
That is, addition to the index forecasts, I've added the quoted levels on the CME Case Shiller Q23 (Aug 2023) contracts (highlighted in orange). It should be no surprise to readers here that a) I believe that quotes on expiring contracts should bracket expectations, and b) that I'm often the person on both the bid and ask side. (Often, but not always, and I VERY much appreciate those who contribute.)
In 8 of the 10 regions the bid/ask quotes are on either side of my forecasts (with DEN and SFR forecasts only slightly below the bid side of the Q23 market). There are many reasons why markets can be quoted away from my point expectations e.g. others may be bidding/offering, I might have positions I'd like to close, I might have orders in hand that justify my quotes, and/or I may have a wider confidence interval on some regional forecasts, or there may be other reasons. Alternatively, I might have a very high confidence in a very narrow range for my expectations, but -in the absence of third parties -have no reason to "trade against myself" and make tighter than the 3-4 point markets shown here.
There are other traders who typically show up in the last week of trading (before expiration). If you have strong views on the Case Shiller indices to be released on Aug 29th, please consider expressing those views here, either with a trade, or better bid or offer. All three actions will help improve the perception of liquidity in this market. (If you want a public market in home price futures, this would be an easy way to show support, and you can tell your risk management team that you'll absolutely be out of the position by August 29th.)
The second wrinkle stems from the fact that I've also been posting forecasts on the "other"/ "second" ten cities that are referenced in the Case Shiller 20-city index. While I've been using those forecasts to help with the longer-term quotes for the HPHF Ratio Agreements, I've also (internally) been using those forecasts to test OTC quotes for these ten cities. My faith in the forecasts is such that my markets (in green) for the "second" ten cities is +/- ~3 points around those projections. As above, I'm looking for for feedback/challenges from others who have different views on those expiring indices.
Please feel free to DM me, and/or opine on either set of forecasts, and as importantly, weigh in with either bids and offers on the CME-referenced regions (via futures contracts) or the "second" ten cities (and we'll figure out how to structure an agreement).
Thanks, John
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