Intercity Spreads ("IC") are a useful, efficient way to express a view on how home prices in one metro might perform vs. another metro (or more often the 10-city index) for a particular expiration. Users can enter two legs of a trade simultaneously, at pre-negotiated levels, without having to execute the legs of the trade separately. Also, IC spreads are often quoted inside arbitrage levels, allowing a user to perform a better execution that hitting the bid in one market, while lifting the offer in the second market.
The table below illustrates one way to convert IC spreads into differences in implied HPA.
Here HCI/BOS:G26 is quoted 7.2/10.0 (bid/ask). Note that prices are always presented as the front contract - in this case the HCIG26 (Feb '2026) 10-city index contract vs. the back contract. The bidder here is willing to buy the HCIG26 contract 7.2 points above the BOSG26 contract while the seller is proposing to sell the HCIG26 contract 10.0 points above the BOSG26 contract. In the example, the bid side of the IC spread would correspond to prices of 361.2 on the HCIG26 contract and 354.0 on the BOSG26 contract. The price of 361.2 is 3.1% above the spot level of the HCI index, while the implied price on the BOS contract of 354.0 is 4.4% above spot. As such the bidder of the IC spread (i.e. someone getting long HCI vs BOS) is looking to buy HCI at a 1.3% lower implied HPI (4.4%-3.1%).
The ask side works the same. The offer of 10.0 might correspond to an offer on HCI of 364, with a bid on BOS of 354. In this case the difference in the implied HPA gains is with BOS outperforming by 0.5%.
As such, "the market" on the HCI/BOS IC spreads converts into -1.3%/-0.5% HPA spreads. That is the IC bidder wants to buy HCI (and sell BOS) if he can get HCI at an implied HPA discount of -1.3%, while the offer is looking to levels that correspond to HCI lagging BOS to Feb '26 by 0.5%.
Note that both sides of the market are priced to BOS outperforming HCI. The debate has narrowed from not whether BOS will outperform, but by how much.
Since the HCI (10-city index) is an average across metros, some areas are priced for outperformance (e.g. NYM, CHI) while some are priced for the metro to underperform HCI (e.g. DEN, SFR).
I typically quote IC spreads for all ten metros vs the 10-city index for the front and February expiration cycle. As such, placing quotes in the HCI G25-G26-G267 contracts tends to also add depth to the metro contracts.
At times, I'll create IC quotes between pairs of metros (e.g. BOS v NYM or LAX v SDG) if there is an ongoing debate about HPA differences between the two, or if one has a very tight market.
Note that IC quotes are one contract vs one contract. Since each contact has different notional values ($250* price) the expression of HPA differences may not be for the same amount. Users can either weight the contracts (e.g. 10 CHI v 6 HCI would have the same notional value) or we can discuss OTC ratio agreements. (https://www.homepricefutures.com/posts/adding-more-information-to-reformatting-hphf-ratio-agreement-template)
A benefit of the second option is that RA's can be done on endless Freddie Mac or Zillow indices. I'd be happy to facilitate any discussion of RAs.
DM me for a table of IC quotes for particular expirations, or if you'd like to see an IC metro pair.
Thanks, John
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