Today (May 24) is the last day of trading in the K21 (May 2021) CME Case Shiller home price futures contracts. The contracts stop trading today at 3 PM Eastern (even though other expirations keep trading until 4PM). Settlement values are the index numbers released tomorrow morning (May 25) at 9 AM.
Ten-city contract prices and index values have both been rising since last summer, with the contracts finally moving (back) to a premium over the spot index in December 2020. (Historically, the forward-looking contracts have tended to trade above spot levels). While the contracts and index converge, a gap remains for May numbers to fill in. Given the 265 bid in the May HCI (10-city) it seems safe to predict that the index value (black) will rise to near the contract values (in blue) to narrow the difference on settlement.
Today's quotes on the regional contracts reflect large month-on-month nominal gains for all regions ranging from 3 to 10+ points. Using the mid-points of the K21 (May 2021) contracts, tomorrow's headlines should be touting continued double-digit percentage year-on-year gains.
Bid/Ask spreads are wider than historical norms for trading on settlement date, but the indices have been volatile and subject to larger revisions (during Covid) so forecasting probably needs a bit more variance.
Feel free to contact me about this blog, if you have trading ideas, or if you'd just like to learn more about how home price index derivatives might be used in hedging strategies.
Thanks, John