Here's my latest effort to promote home price index agreements for regions not referenced by CME contracts. This table includes suggested levels, on February 2020 expiration, for the other ten cities in the Case Shiller 20-city index -the "Second 10". Recall that -for Case Shiller indices -the February index release that would be used to settle such agreements -references the 2019 year-end Case Shiller numbers. As such, debate about the appropriate clearing level for these agreements should help foster discussion of 2019 HPA.
As a general observation the quotes for these "Second 10" regions are -on average -slightly higher (as a % versus spot) than those on the regions referenced by the CME contracts. The Case Shiller 10-city has three California regions (LA, San Fran and San Diego) -all of which have been under pressure -while this list of ten contains regions that tend to have relatively lower priced homes (the strongest sector of the market). That said, there is probably more dispersion across this group of ten as it includes Seattle (which has been one of the worst performing regions over the last 6 months), as well as some of the southern cities (e.g. Atlanta, Charlotte, Dallas and Phoenix) that have been doing better.
My intention is to arrange agreements via my Home Price Hedging Fund (see link for details) but I'm open to other ideas.
I'm also open to quoting options on these indices.
Please feel free to contact me if you have any questions on this blog, or any aspect of hedging home price indices.
Thanks,
John