With about one week to go until the April 30th release of the February Case Shiller indices, I thought that it might make sense to update price tables and graphs. While volume has been near zero there’s been a relentless inching in of bid/ask spreads. The BOS, LAX, MIA, SDG and WDC contracts all show average bid/ask spreads being about 2 points tighter than they were on March 30th. The bid/ask contraction has been a function of two trends: a) very narrow bid/ask spreads in the front (May ’13) contract (see below), and b) a flattening in the longer end of curves as Nov ’16 and ’17 offers lowered.
The updated table/graph are located in the Reports section or can be accessed here: Graph / Table
While there’s been some improvement, the MIA, LAV and SDG markets have much more run to tighten. However, as with other regions, traders seem to be waiting for the April 30th numbers to see how the interplay between seasonal factors, and recent improvement in home prices, is playing out.
As mentioned above, front contracts bid/ask spreads have tightened. Four contracts (BOS, CHI, LAV and SFR) have bid/ask spreads of <= 1.0 point, and all contracts are <= 4.0 points. Prices for three May mid-market contracts (BOS, CHI, and NYM) are consistent with a decline in index levels over the next two months, while five contracts have price increases of >1% priced in (by May). Finally, open interest for May is 25 contracts. This
This combination of (relatively) tight markets, a divergence of outlooks across regions, and a reasonable amount of open interest (across 8 contracts) has, in the past, been a good catalyst for trading. I keep pushing inter-city spread trades as a reduced risk approach to trading. Feel free to contact me (johnhdolan@homepricefutures.com ) if you have a proposal you’d like to discuss.