I posted a recap of activity in the CME Case Shiller home price futures to the Resources page on my website. You look there, or link here.
Highlights include:
–Activity for July included 9 lots traded, across only 3 expirations, and 3 regions. Trading was like 2019 except for one competitive, 5-lot offering, from a third party, in the HCI Aug '21 contract. I will be blogging about Aug '20/Aug '21 calendar spreads in the near future, to prompt further debate of both: !) where will home prices be a year from now, and/or 2) how much of a discount might there be in forward prices that just reflects an imbalance of sellers and buyers and where risk clears.
–Prices were generally lower across all regions. Before this, prices had almost rebounded from the April lows.
–Bid/Ask spreads were wider on longer expirations, but unchanged out 1-2 years.
–Aug and Nov‘20 contracts reflect current strong home price market, but then prices fall to 2021. While longer prices (e.g. G24,G25) are above G21, there’s a wider variance on G22 and G23 levels.
–I’ve been getting more inquiries on puts. While I’m open to writing a small amount (OTC) from the Home Price Hedging Fund platform, other put writers are needed to build this market. My sense is to have all interest focus on HCI (10-city) contracts, and then using RP (Relative Performance) Agreements for individual city risk.
–I’m also hearing from readers looking to hedge regions not covered by CME contracts (e.g.Seattle, Austin). I’ve tried to also steer many of those conversations to RP swaps. More on this in early August.
Please feel free to contact me if you have any questions on this recap, any trading ideas (particularly on options, other cities, and calendar spreads), or want to discuss the use of regional home price index derivatives in hedging strategies.
Thanks, John