I've posted a recap to activity in the CME Case Shiller home price index futures for May. The link is on the Resources page or can be accessed here.
The key feature of May activity was the large price upsides in across all regions and expirations. Most notably, prices may have been most volatile on the shorter expirations where -with the release of the May CS #'s -pricing expectations changed from assuming some negative impact of Covid on home price for March (and therefore the May index) to near no impact through the components of the Aug index (April- June). As a result, quotes on the more actively quoted contracts, to include Aug '20 (Q20), Nov '20, and Feb '21 (G21), all moved dramatically higher. (Note that even with this move, Feb '21 contracts are still offered at discounts to spot).
Other finding include:
Activity for May included 13 lots traded, across 4 expirations, and 8 regions. This is a sharp decline in volume from a pace that had averaged >50 lots/month for the last three months.
Trading was very concentrated in front contracts, and much of the activity took place just before May 26 CS #’s.
It would seem that with much higher prices, those that had been looking to hedge might consider a second look. Yes, the stock market has screamed and many parts of the economy have re-opened, but the fundamentals of the housing market have not changed much. (After all you still have >20mm filing for unemployment, which might make it more challenging should they want to buy a house).
Feel free to contact me if you have any questions related to this blog, or how to use home price index deriviatives in hedging strategiees.
Thanks,
John