CME Case Shiller futures higher -post updates to indices

The CME Case Shiller home price index futures are higher this morning after the 9 AM updates to the index.

The table below shows prices on the Feb '21 (G21) contracts (i.e. the ones that will settle on the Dec '20 indices). The 10-city index contract (HCI), as well as each of the ten regional contracts, are higher by 1.4-3.0 points (as measured by a comparison of mid-market values from yesterday's close to today). Bid/ask spreads are about where they were yesterday. No contracts have traded today (and for a few days).

My thinking (since many of these quotes are mine) is with the passing of another month without evidence of any major increase in distressed sales, the natural discount of forward contracts to expectations, is reduced. (See my May 1 blog for a more detailed explanation of the forward discount.) The August contracts are quoted at a premium to spot, the November contracts have rallied to only slight discounts to August, and the movement of both has dragged Feb '21 prices higher.

A few nits:

There was a sizable revision to the SFR index for March, so that the month-on-month index increase looks different depending on whether you are comparing last month's published number or the newly updated value.

For the second month there was no index produced for Detroit.

The number of data points (closings) dropped dramatically since last year. The data produced by S&P show declines in April closings ranging from a small increase in Minneapolis, Cleveland (7.4%) and Portland to steep declines in NYM and LAX (~-28%). Since the Case Shiller futures are calculated on moving averages (weighted by volume) this may play games with index values for August and November).

As always, please feel free to contact me if you have any questions on this blog, or any aspect of using home price index derivatives (both CME futures and HPHF OTC agreements) to add/reduce exposure to regional home prices.