The CHI contracts merit some attention for a variety of reasons. CHI has seen some recent trades (including CHIG13 last night at 110.2), has one of the tightest markets for G13, X13 and X14, has the largest open interest of any of the regional contracts, has the flattest mid-market forward curve (out to Nov ’15 as there are no two-sided markets in ’16-’17), had one has the tightest bid/ask spreads (except CUS), had one of the strongest rebounds during the summer of 2012, and yet has the weakest Feb ’13 mid-market (as a percent of spot index) of all 11 contracts. Whether the reason is weather, state pension systems, judicial foreclosure process, or population trends, CHI is worth studying as the data-point on the bearish end of the Case Shiller continuum of markets for forward home prices.
Here are three ways of trading CHI. (As always, counters are appreciated as tighter spreads tend to lead to more trades).
As mentioned above, the outright markets the G13 (110.0/110.4), X13 (116.4/118.4) and X14 markets (119.0/124.0) are the tightest bid/ask spread markets.
Calendar spreads are quoted (X13/X14: -5.6/-3.0), (X13/X15:-10.0/ -5.2) which suggest modest year-on-year home price improvement (which is at odds with some recent forecasts e.g. Clear Capital).
Finally, the mid-market levels of these (non-arb) inter-city spread quotes (CUS/CHI-X15: 51.0/56.0), (CHI/SFR-X15: -45.0/-38.0) and (CHI/NYM: -62.0/-54.0) all are consistent with CHI under-performing the three other regions between now and Nov ’15.
There are dozens of permutations of CHI outright, calendar and inter-city spreads that could be quoted. I’ve noted these three to prompt discussion (or just improved markets) as there already seems to be trading interest in the CHI contract. As always, please feel free to contact me (johnhdolan@homepricefutures.com) if you have interest in these quotes, or to discuss any other CHI (or other) market.