I've posted a recap of activity in the CME Case Shiller home price index futures for May, in the Resources section of this website. Alternatively you can link here.
Highlights of the report include:
–In May, ten lots traded in four regions and three expirations. As is typical, more than half the trades occurred in the front contract. With the switch to Aug '21 (Q21) as the new front contract, most third-party interest has shifted there.
-My sense is that (for the first time in years) inquiries during 2021 have tipped toward more buyers than sellers (a- as there are few other pure plays on forward home prices, and b -as quotes had lagged). I worry/expect that hedgers will dominate on the first sign of weakness in home prices.
-Prices on shorter (2021) expirations moved higher early in the month, and then (after Case Shiller #'s were released on May 25th) I began to put more steepness in the G22/G23 part of the curve, by raising calendar spreads (See report for G22/G23 quotes). My sense is that calendar spreads still are consistent with levels well below forward expectations.
–The price rises in the report understate the gains as only markets with two-sided quotes were tallied. (There were month-end bids on all 110 contracts -11 regions X 10 expirations) but offers on less than half. The table below is more indicative of the changes with large bid increases in longer-expiration SDG, SFR and WDC. in the absence of trades, bid increases like these will result in large gains in closing prices (which might impact later studies on volatility).
Please feel free to contact me if you have any questions about this blog, have any trading ideas that you'd like to explore, or just want to learn more about the use of home price index derivatives in hedging strategies.
Thanks, John