S&P released the monthly Case Shiller indices this morning. There were four "surprises" (defined -for this blog -as a number that falls outside the bid/ask levels on the expiring Nov. 2020 (X20) contracts. Two (CHI and NYM) were a result of relatively large revisions in prior months, and those gains were picked up in the HCI (10-city index) as CHI and NYM comprise ~37.5% of the 10-city index. SFR was the final outlier, which surprised me as the reference period (July-Sept) covered a period when the SFR sky was impacted by fires.
Almost all of the 11 numbers were above mid-market levels (except DEN and WDC), consistent with strong home price gains.
Given that upward bias in the CS numbers, the benchmark Feb '22 (G22) contracts are quoted higher, across all regions. CHI and SDG lead the gains, while DEN and WDC are the laggards.
Bid/ask spreads are about unchanged since yesterday, and now with the CS numbers out of the way, should tighten.
There were no trades today, but two trades on Monday.
With the expiration of the Nov '20 contract, the CME opened trading in the Feb '26 (G26) contract. (My own definition of optimism is trading a contract that won't expire until I'm 72!).
Also, with Nov '20 rolling off, Open Interest ("OI") has dropped to 27 contracts (with zero OI in BOS and WDC). My records show that this is the lowest OI since the contracts were introduced. My sense is that with home prices on a tear, few see the need to hedge. I'll keep pushing to find where there's interest, but in the meantime I'd appreciate any help. Contributions of quotes (or trading ideas) for the G21 and G22 contracts will have the biggest impact, as some traders like to focus on the front contract, while the G22 contract is connected to other contracts via Intercity and calendar spreads.
Feel free to contact me if you have any questions about this blog, have any trading ideas you'd like to explore, or if you have any questions related to the use of home price index derivatives to hedge home price risk.
Thanks, John