It's been several weeks since I posted a general (or month-end) update. Here's a few things that have been updated on the site:
Trading as been quiet. There were 185 lots traded in 2023 (across all regions). This is up from 166 in 2021, but behind the stronger rolling 12-month run rate the pace from June '21/June '22 (when volume spiked as markets turned). The bulk of that was in the 10-city index contracts and for the Feb expiration cycles. If you're looking for liquidity, the best place is the Feb 2024 10-city index contracts. (Today 276.2/280.6).
Most recent trading has been in the front contract (Feb '23) as users debate the impact of activity from Oct-Dec on the final index tally. FYI four G23 contracts traded last week.
In anticipation of the expiration of the February (G23) contract, I've started adding outright quotes to May '23 (K23). Most quotes are to "get things started" and to anchor forward calendar curves (e.g. I've added some May/Aug (K23/Q23) calendar spreads, and May '24 will be the next "new contract" so this will help get ready for K23/K24 spreads.)
I've filled out intercity spreads for G23, G24, G25 and G27 (skipping G26 and G28 for now to focus longer-term interest in one contract -G27). The G23-G24-G25 IC spreads are "competitive" in that: a) most G24 translate into 2% bid/ask spreads (e.g. HPA vs 10-city index +1% v +3%). There are clearly some outperformers (e.g. MIA 3.3/4.5% outperformance vs 10-city for 2023) and some under-performers (e.g. SFR ~-2.6%/~-1.0% relative performance). All G24 IC spreads are < 7 points (recall that IC spreads are quoted in relative contract prices).
The G25 spreads are "taking shape" with some tight quotes (e.g. BOS, DEN, MIA, NYM, WDC all <= 8 points). The call is tougher on LAV, LAX, SDG and SFR as there seems to be wider dispersion of forecasts there. I've not yet posted CHI.
I started added G27 yesterday to prompt discussions on longer-term hedging as several pundits seem to think that home prices will have started tending up by then. The question that the IC spreads frame is who will be the longer-term winners and losers. For example, DEN has been under pressure (as have many metros in Mountain States) but the longer-term demographics seem to be favorable. By contrast, MIA (and all of Florida) have been on fire since at least 2019, but how long will that last, and might climate change (and rising sea levels) have an impact there?
In addition to markets, I've added an "Axe" table on the resources page to share inquiries from readers as to areas that they'd like to hedge. These all include metros not covered by CME contracts, but some (e.g. Delray Beach, Florida) might lend themselves to correlation analysis vs MIA (in which case I'll need buyers of longer-dated MIA), (note same for Evanston and CHI index), some have Case Shiller indices (e.g. Charlotte) where an OTC HPHF Ratio seems to be the best solution, and some (like New Canaan, Ct) where the most local CME contract (e.g. NYM) may not have a high correlation.
I'm looking for ideas (and possible counterparties) to anyone looking to take the other side of such risks, or metros with CME contracts.
In addition, feel free to share any localized exposures that you'd like to see a hedge, or where you'd like to add exposure.
Finally, I've added a few links to my Resources page. I've tried to limit all of those listed to entities that focus on home price forecasts.
Let me know if there are other issues that you'd like to see addressed here, and again, if you have any hedging needs.
Thanks, John