New York – HomePriceFutures.com

Moving? A potential application of Inter-city (IC) spreads

Redfin recently published a great piece that detailed how some residents look beyond their local area for their next house. They noted that many many people in a region look at the same next cities (sorted both by in-state and out-of-state searches) with certain marked preferences. For example, many LA residents eye San Diego, New Yorkers frequently consider Boston, and Denver homeowners seem to covet Seattle’s low taxes.

The graph below (from Redfin) show the net flow of users searching for other regions. (Net flow is the number looking to leave versus the number looking to take up residence). Seattle has recently re-taken the award for most people looking to move there, while Denver residents are looking elsewhere in larger numbers. This is interesting data to those who believe that population flows are a key component to changes in home prices.

Residents moving from one region another may face the risk that home prices will fall where they live, while rising where they want to move. Fortunately, my analysis suggests, and other research confirms, that home prices on many of the common pairs that Redfin identified are highly correlated, using region-wide measurements. ^1 For example, using YOY changes in Case Shiller indicies, the LAX, SDG and SFR regions have all been >90% correlated since 2013.^2,3 Surprisingly (to this former Connecticut resident now living in DC) the correlation across the three Northeast regions is not as strong, ranging from as low as 43% between NYM and WDC, to >75% between BOS and NYM and WDC.

For those in the later categories, intercity spread trades may be a useful tool for going simultaneously short futures on the region they’re leaving, while going long on the region to which they hope to move.^4 In effect, users might be able to hedge some of the risks of their move.

The table below lists (on the left side) the top 6 interstate 2018 transitions highlighted in the Redfin highlighted report. (I’ve added the intrastate move from LA to San Diego, as there are CME contracts on both). While the Redfin article has much more detail on the net number of people moving, my contribution to this discussion is to share how the CME markets (using the Feb ’20 contract to capture 2019 year-end values) might be used to possibly hedge these moves.

First, here’s a few explanations and observations:

For both the “From” and “To” cities, I’ve listed the current spot index, the bid, ask, and mid-market for the Feb ’20 (G20) contract on each city, or levels that I’d consider OTC trades (i.e. for Seattle, and Phoenix -highlighted in yellow)^5. The “Mid/ Spot -1” columns show the difference (in percentage terms) between the spot index for each city (both “From” and “To”) versus the spot index for each city.
Note that between the pairs of “From” and “To” cities, there are a total of 10 cities, and that for all but 3 (Seattle, Denver, and Phoenix) the “Mid/Spot -1” is a negative percent. Recall that the CME figures (at least for one-year forward contracts) don’t necessarily represent expectations of lower prices. The bids and offers are just levels that traders are willing to buy or sell contracts.
Note that in 6 of the 7 moves that Redfin highlighted, the “Mid/ Spot -1” value is higher in the destination city. (The difference between the two is shown in the “Diff” column.) Thus, it seems that either people may be moving to the more booming cities, or the act of people moving to those areas is correlated with better performing home contracts (as measured by the “Mid/Spot -1” metric.
Note that, the San Fran to Seattle move looks to have the biggest “payup” (i.e. going from a region where these quotes would be consistent with the SEX (Seattle) index outperforming the SFR index. By contrast, the move from Washington DC to New York, seems like the best bargain, as these quotes are consistent with WDC (Washington DC) index prices falling slower than NYM.

Finally, I’ve added levels where I’d be open to an intercity spread trade. For example in the NY to Boston move, the difference between the NYM and BOS “Mid/ Spot -1” numbers is 1.85%. Since both regions have a CME contract, I’d buy a NY contract while selling a BOS contract (a pair someone moving might be interested in ) where Boston outperforms NY by 3%, or go the reverse (buying Boston/ selling New York) where Boston outperforms by 1%. (See example below).
I’ve not posted this particular IC trade (or any of the others) as best orchestrated off-exchange, or users will need access to a broker who can execute IC trades.
While I’ve focused on the pairs Redfin highlighted, and for the Feb ’20 contract, in concept it’s possible to construct any other pairs of indices, for any other expiration.

Please feel free to contact me (johnhdolan@homepricefutures.com) if you’d like to discuss any aspect of this blog, want to move forward with any of the IC proposals discussed, or have questions on any aspect of hedging home price indices.

Thanks,

John

Footnotes:

^1 This might be no surprise as the people that like the attributes of one region seem to see similar attributes in another.

^2 Recall that correlation means that they move in the same direction at the same time, but not necessarily by the same amount/percent.

^3 Note that these are changes on the index, not any particular expiration of a futures contract.

^4 Even for those moving between two highly correlated regions, futures might be a useful tool should one be increasing/decreasing exposure.

^5 Contact me for details on how one might trade any home price index, not listed on the CME.

Revisiting ways to play the impact of a lower “Mortgage Interest Deduction” (MID

I had previously written about possible ways for market participants to play the impact of the prospects to changes in the Mortgage Interest Deduction (MID) in a blog on Oct 21 . Since this remains a timely topic, I again want to offer two opportunities for fans of the NAR’s (National Assoc. of Realtors) views, on how they might play the pending collapse in home prices in the higher- home price areas that have historically taken advantage of MID.

The first would be to enter either an OTC spread trade, or a total rate-of-return swap (TROR) on the difference between the performance of the Case Shiller 10-city index and the Case Shiller National index over some time frame. The CS-10 index contains many of the areas with higher-priced homes (e.g. NY, San Fran, Los Angeles) while the National index covers a much wider cross-section of the country that includes many lower-priced homes, where borrowers would presumably be less impacted by a cut in the ceiling in the amount of mortgage debt subject to the MID. The graphs to the right show the index values for the Case Shiller 10-city, 20-city and National indices (on top) as well as the year-over-year percentage changes in the indices.

Note that while the 10- and 20-city indices did much better in 2013, that the National index has recently been outperforming the 10-city index (i.e. 6.07% vs 5.33% for the last year, as of the October Case Shiller numbers released in Oct.) I would be open to an OTC trade on the differences between the index levels one-year forward (currently 216.5 on the 10-city index and 195.1 on the National index), or on the difference in percent gains (currently 74 bps) on the YOY gains in the National versus 10-city index.

While the above speaks to possible OTC trades, one can also take a more targeted view (by area) on existing CME products (i.e. Intercity Spreads). That is, one can “bet” on the performance of a particular regional index versus the Case Shiller 10-city index, if one truly believes that the areas with the highest priced homes will suffer relative price declines with the lowering of the cap on mortgage interest deduction.

The table above lists six regions that have both larger than average home values (using the Zillow ZHVI) as well as having regional CME Case Shiller futures contracts. (Note that while Zillow and Case Shiller geographic regions are not a perfect overlap, the ZHVI index does a good job of comparing the average prices to their national average. By any measure these six regions have higher-priced homes.)

In addition to a trader just outright selling the NYMX18 or SFRX18 contracts (X18= Nov 2018), they could also enter into an Intercity Spread trade where they simultaneously buy one contract and sell the other (in this case the CS 10-city index contract -HCI). This might be a more conservative play than just an outright sale as the end result will be a function of the difference between the two indices referenced in a trade. These IC contracts are listed where the bid side shows the price difference between where one might buy the HCI contract while selling the regional contract. So, for example, the -29.6 bid on HCI/SFR-X18, displays the bidder’s willingness to buy the HCIX18 contract at 224.8 while selling the SFRX18 contract at 254.4.

Note that the 224.4 price on the HCIX18 contract is 3.84% above the current spot level (of 216.49) while the SFRX18 price of 254.4 is 4.47% above the SFR spot index of 243.52. In effect, were one able to execute this IC trade on the bid side, one would be selling the SFRX index (for Nov 2018 settlement) with higher priced gains over the next 13 months, than the HCI index by 63 bps.

(The analysis in blue, shows the relative differences were a buyer to pay the offered side, in this case -28.0 points on the IC spread).

Note that if one were able to buy the IC spread on the bid side, they would be entering the trade at levels where in 5 of the 6 cases, the regional contract would be sold at a level with implied gains, higher than that of the regional contract. (The NYM contract is priced for lower price gains than the 10-city index).

Even if one bought the IC spread on the offered side, they would still be selling the BOS and DEN regional contract with higher priced gains than the HCI contract.

I am open to facilitating inquiries (or trades) on small amounts of such IC spreads to prompt further reaction to the MID debate. Please feel free to contact me (johnhdolan @homepricefutures.com) if you have any questions on this blog or any aspect of hedging home price indices.

Impact of “neutering” of mortgage deduction on home prices. A trading opportunity?

The Wall Street Journal had an article Tuesday morning (see link) titled “Mortgage Break Faces Irrelevancy” which outlined possible impacts from proposed tax changes. The author (Laura Kusisto) quoted several sources each of whom suggested that, under the current proposal, fewer taxpayers would be able to take advantage of the mortgage interest deduction, as they would find defaulting to use of the standard deduction (which might double) more attractive. (See WSJ illustration below graphically depicting projected changes in use of standard deduction across selected regions.) Based on that premise (and assuming that deduction of state and local taxes were also abolished), some (not-so-disinterested) parties, such as the National Association of Realtors (NAR), arrived at a forecast that, were the tax changes to be implemented, home prices would fall ~10%. (See the report the NAR commissioned from PriceWaterhouseCoopers here. )

When people make such outlier forecasts (most housing experts are projecting 4-6% gains in 2018) I like to remind them that the CME Case Shiller futures and options platform provide the best public, pure-play to financially express their views.

To recap the opopportunities for housing bears, or just for those who worry about increased volatility as the tax legislation gets debated, recall that:

There are futures contracts on the Case Shiller 10-city index, and ten more for each of the regional components. Six of the cities highlighted in the WSJ article have CME regional contracts. (Note 1 – regional definitions may not overlap. Note 2- transactions referencing other regions could be done in over-the-counter trades.) As such one can view forward prices, or take a position on an index that spans many regions, or, alternatively, if you believe that the high-priced coastal areas (that typically have higher mortgage balances and local real estate taxes) will be hit harder, trade the BOS (Boston), NYM (New York), SFR (San Fran) contracts.
There are 11 expirations for each contract to include quarterly contracts that mature in Nov ’18, Feb ’19 and Mar ’19. Since the contracts cash-settle (much like the S&P 500), contract prices should eventually converge to the index value at settlement. As such, some argue that, forward prices may incorporate some expectations of forward index levels.
The current CUS (10-city index) is 215.50, while the Nov ’18 is quoted 224.0/225.0 (or 3.9/4.4% above spot). That is, the market is priced for ~4% gains, so if you believe that home prices will fall (conditional on some events) you might expect to see a sharp price decline. This contract might be a way to express that, or just observe market reactions as proposed tax legislation moves forward.
In addition to futures, puts (and calls) can be traded on the CME platform. Strikes are quoted at 5-point intervals so one might look at the 215, 220, or 225 strikes. These are options on the futures so while they can be traded, they can only be exercised at expiration (European style).
Finally, if a trader thinks volatility will jump higher (or stay low), one can pursue many universal volatility strategies (e.g. buying/selling straddles, strangles, across strike combinations).

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions about this blog, or on the topic of hedging home price risk, or would like to discuss a trade.

Thanks,

John

Hedging NYC Condos -a template for other regions?

I received an inquiry the other day about hedging NYC condo risk. I wrote a somewhat extensive reply as:

I figured that there might be others interested in hedging the same exposure,
there already exists Case Shiller indices for the more geographically dispersed NYM index, as well as a NYC condo index, and
the issues raised here might apply to other one-off regional inquiries whether they be local (e.g. Greenwich), another Case Shiller index not traded on the CME (e.g. Seattle), a different index (e.g. Zillow, Core Logic, FHFA or other), or international (I’ve had discussions on how to hedge home prices in Vancouver, Beijing and London).

On the first point, NYC is right in my back yard (so I have a sense for it), and many of those who understand hedging and derivatives, work there. It’s also a market with a massive notional amount, yet possibly with more fungibility than the New Haven to Jersey Shore to Putnam County NYM index. So, lots of possible hedging interest with possibly less basis risk for individual home-owners (versus the index).

Second, I noted that there is a NYC condo Case Shiller index (as well as condo indices for BOS, CHI, LAX, and SFR -so we could have the same conceptual discussion with those cities). (See “Additional Info” tab at S&P website: http://us.spindices.com/index-family/real-estate/sp-corelogic-case-shiller for data).

A quick analysis (see diagram below) suggests that the NYC condo index has been highly correlated with the NYM index. (I used YOY % changes to minimize seasonality issues). While the relationship has been strong, NYC condo index values have steadily outperformed the NYM region. Both started at 100 in Jan 2000, but the condo index is now 270.92, while the NYM index is 185.26. (I leave discussion of why urban areas have outperformed regional indices to other commentators.)

However, given the strong correlation, one possible approach to hedging NYC condo risk, may be just to short some amount of NYM futures.

However if one wants to hedge using the NYC condo index directly there are other issues to include:

price discovery on forward prices, and
counterparty risk, as there is no exchange-traded product that might typically help with both.

(Note that there are many NYC condo indices that one might use. I’ve chosen to illustrate my example using the Case Shiller index as the correlation with the NYM would make hedging the futures exposure possible.)

An example of the challenge of price discovery might be if (hypothetically) you might want to sell the CS NYM condo index at +6% , one-year forward, versus the most recent level (i.e. 270.92*1.06= 287.16) while a buyer might only be willing to pay a price consistent with a +4% increase (i.e. 270.92* 1.04 = 281.76). However, without an exchange, and/or a central place to meet, or a chat room to compare levels of interest:

you might not find each other, or worse,
you might not know that there’s a buyer at 289! (BTW- the same exercise would be true if the parties wanted to do an options trade.)

This is where I’m trying to help, via website blogs, and social media touting. Think hub-and-spoke models.

However the challenge of the second point (counterparty risk), is that even if the parties agree to a price, how can one party ensure that the other side makes good should the prices move sharply against him. I’ve tried to address this with an OTC (over the counter) trades where each party puts up some margin (e.g. 5-10% of notional amount) to a third party custodian, where that becomes the total maximum payout.

For example, let’s say that we agree to take opposite sides on a NYC condo trade at a price of 284. We might agree that the notional amount equals $100/ lot, or $28,400 notional per lot. So, if you wanted to put on a $500k hedge we might agree to use 17 lots (for $484,280 notional exposure). Each of us would put up either 5% ($24,140) or 10% ($48,280) of the notional amount to a third party. The payout one-year from now would be based on the difference between the CS index published one year from today, versus the agreed-upon price (e.g. 284).

As such, if the final index was 281 (the seller would be awarded (3 points (=284-281) *17 lots * $100/lot) and would get their initial payment plus $5,100, while the buyer would get back their initial payment less $5,100). (I might charge some fee per lot for orchestrating the trade). If 5% margins were used that payouts would be capped at 269.8 (-5% versus trade, where the seller would get all the collateral) and 298.2 (where the buyer would get all of the collateral. Better still, I’d probably suggest bounds of 270 to 300 so that trades could be assigned and somewhat fungible.

While -5%/+5% might seem like a narrow range for one year moves, the range bounds expectations, not the spot index. So if the trade price was +3% over the spot index, payouts would max out on moves of about -2% to +8% moves in the spot index over the next year. On-year moves of more than 5% on a forward price are unusual, but not impossible. One could work with wider margins, but down-payments on each side would be higher. That is, the lower the margin, the better the leverage.

I’ve already done one such trade –for a different region – so this is not hypothetical.

There would be other issues. Data vendors might demand licensing fees on the use of their index in a derivative trade. I’m aware of some fee schedules but would have to check on other data vendors. In one instance there is a large fee for the first trade (referencing an index) but then marginal fees are much lower. Hence it will likely make sense to reference indices where either fees are low, or expected trading volume is higher.

So, does anyone want to talk about hedging NYC condo exposure, condo exposure where there’s another CS index, or any other home price index around the world? If so, feel free to contact me (johnhdolan@homepricefutures.com)

Feb CS #’s vs. CME Quotes

The Case Shiller numbers released yesterday (Feb 28) were generally in line with CME quotes on the expiring Feb ’17 (G17) contract. CME quotes from Feb 23 bracketed the actual CS # across nine of the ten regions (with NYM CS #’s coming in just slightly above the offered side of the NYMG17 contract)*.

I’ve used Feb 23 prices as I was traveling from then until yesterday. While there were seven trades done on the 24th-27th, there were no trades yesterday.

Despite CS index values coming in within CME price ranges (so only one “surprise”) CME prices on longer-dated contracts have risen. I hope to post a market reaction blog in the next day or so.

( I apologize for the “noise” associated with CME prices over the last 2-3 trading days. Between travel, power outage (during home renovation), and other issues, many quotes were deleted and I’m manually re-entering).

As always, if you have any questions, please feel free to contact me (johnhdolan@homepricefutures.com) to discuss this blog or any aspect of hedging home prices.

(*- While I qualify all of my blogs that any numbers shown are my best estimate, or recollection of where contracts were posted, or where trades took place, given my recent time away from my desk, I want to remind all readers that they should not rely on numbers posted here for trading decisions, and that they should independently assess relevant market information.)

Reaction of Prices at CME post Jan release of Case Shiller #’s

Quotes on CME Case Shiller home price index futures are higher across the board after this morning’s release of the November Case Shiller #’s.

Using the Nov ’17 contract (X17) as a proxy, mid market prices are up from 0.4 (in LAV and MIA) to 1.2 (BOS) and 1.7 (NYM). The price changes seem to be consistent with the gain in seasonally adjusted values for the indices (as both BOS and NYM seasonally adjusted index values were up over 1 percent from the prior month). Gains are slightly higher in shorter expiration contracts (e.g. BOS Feb ’17 (G17) is bid 2.6 points higher.)

Bid/ask spreads are slightly wider with most spread widening occurring in Nov ’17 expirations and longer. Bid/ask spreads on the front contract (G17) average 1.9 points, which is relatively wide with one month to go.

There were 15 trades yesterday (primarily in CHI and SFR contracts, and with a large share in the K17 expiration), but as of 11:30 EST (Tuesday) there have been no trades today. With 23 trades month to date, Jan ’17 looks to be the second highest volume since May 2014.

Recall that electronic trading for options for all regions starts on Mon. Feb 5. I, unfortunately will be traveling, so I hope to get involved the next day.

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions about this blog or any aspect of hedging home prices.

Option Quotes

Here’s my long overdue template for option quotes. I wanted to get this done for the month-end report AND to inquiries I’ve had for HCI (CUS 10-city index), LAX and NYM contracts. (I figured that I’d toss in numbers for CHI to show all four regions where one can post electronic quotes).

Note that my focus (and the inquiries) has been on slightly out-of-money puts for the Nov ’17 expiration. Any other permutation of (round) strikes, expirations and puts vs. calls is possible. However, I think that the futures contracts already suffer from enough fragmentation of interest, so I’m going to focus on these four contracts for now.

The HCI and LAX quotes are 5×5, but I’ve only 1×1 on the others to get things started. I’m open to quoting prices on larger amounts.

(Again, options can be cleared at the CME but they have to be done ex-pit and for a minimum of 20 lots. Feel free to contact me for details.)

Users will need to decide what kind of option pricing model they want to use. I’ve teed up my belief to some academics that while the Case Shiller indices are both a) highly auto-correlated and b) can’t be shorted (or bought and carried) that options on the spot indices might be challenging “although some retail products do reference spot indices. By contrast, data on the closes of futures contracts makes price moves look pretty random, and you can hedge options vs. futures (e.g. delta hedging) so option models might work. (That said, I might consider different estimates for vol as go longer, or skew as you go way out of the money. All the more reason to stick to near at-the-money, relatively short expirations.)

The topic of options is both theoretically interesting (to me) and seems to be an area where there is client interest. I’d be very happy to brainstorm with someone on the topic and/or to tout any trading axes. Please contact me (johnhdolan@homepricefutures.com) if you care to talk about either.

Forward HPA – a review of Q14/Q15 spreads

Forward CME contract prices are consistent with continued (albeit slowing) gains in Case Shiller index values for the next year.

The table to the right shows the outright markets (bids, offers and mid-market levels) for the Q14 and Q15 (Aug 2014 and Aug 2015) contracts for all 11 regions in the left-hand columns. In addition spot values are highlighted in blue.

The “Calendar Spreads:$” columns shows the bids (in orange) and offers (in green) in the calendar spreads. They bracket the mid-to-mid price differences in yellow. (Recall that many services, including the CME show the value of the front contract relative to the back. I’m aware that others, including IB, show it the opposite way. In this display higher forward prices translate into calendar spreads with negative values.)

Next, the column “Calendar Spreads: Implied HPA” takes each of the three calendar spreads denominated in points, divides by the mid-market level (and reverses the sign) to give implied HPA for bid, mid and ask.

Finally, the far right column shows the index value change (in %) for the most recent 12 months.

I’ve used the one-year forward markets to avoid seasonality issues.

Net, all contracts have mid-market levels that are at least 4.5% higher. The range runs from 4.5% (NYM) to 7.6% (SFR). Calendar spreads tend to bracket mid-to-mid implied HPA by about 1.5-2.0% (on each side.

Noteworthy is that consistent with talk about home price appreciation slowing, most of the regions show declining HPA (e.g. LAV from 16.9% to 6.7%). Surprisingly some contracts (e.g. NYM show almost no slowdown) and in one case (WDC) an increase in implied HPA.

The tightest market (as of this writing) was the NYMQ14/Q15 market of -7.8/-7.6 for a 0.2 bid/ask spread. Most other markets were 4-6 point spreads. I’m willing to “sharpen my pencil” should anyone have an interest in a particular contract.

This chart shows prices and spreads for Aug ’14-’15. Any other combination is possible but there seems to be a lot of debate about current 1-year forwards.

As always, I’d be happy to discuss this blog or any aspect of home price futures. Feel free to contact me at johnhdolan@homepricefutures.com

Less is more: Narrowing focus to CUS, NYM, LAX for early June

Since there has been so little trading in the first halves of the last 3-4 months I’d thought that we might have more luck with early-in-the-month trading by suggesting that trades focus on a smaller set of contracts. As such, I’ve pulled together information on the CUS, LAX and NYM contracts,for the November expirations into this handy table. I’m happy to respond to inquiries on other regions. This is just an experiment to see what happens if trading is focused on a narrower set of contracts during an otherwise slow period.

Note: LAX and NYM constitute ~50 of CUS 10-city index. Both contracts have electronic options traded (if anyone wants to go there). Also both contracts might act as good anchors for possible regional inter-city spreads (e.g. BOS/NYM or LAX/SDG) so in tightening spread in these two contracts, there may be spillover benefits to others.

The table pulls together:

Outright markets
Percent gains (bids/offers) vs. spot index
YOY calendar spreads
Annualized YOY % increases (for bid-side, ask-side, and midmarket
(I hope to add IC spreads later)

Note: Prices are hours old and may have changed.

One interest in setting up this table is for others to make these prices even more dated by posting levels inside these quotes and spreads. I’ll try to highlight improvements or any trading axes that people might want to share.

Two of the these three regions (CUS, LAX, NYM) already have the tightest bid/ask spreads for the 9 expirations starting in Feb 2015 across all 11 regions. (DENQ14 and LAVX14 sneak into the top two on earlier expirations).

I’ve only shown the Nov cycle expirations as that’s where open interest is concentrated and those expirations already tend to have tighter bid/ask spreads.

Contract prices and spreads are consistent with the notion that NYM will match or slightly outperform the CUS 10-city index, while LAX looks like it will lag. (Strength in other areas -e.g. CHI and SFR, bring the CUS contract back in to fair value versus the ten components).

I’m open to other ideas to stir up trading activity in the next few weeks. Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any ideas or questions.

As Nov. expiration approaches

The last day of trading for the Nov 2013 contract is Monday. (Recall that the Case Shiller indices will be released on Tuesday and that the Nov 2013 contract will settle on those numbers.) With only a few days to go I thought that I’d tweak quotes and post a market status.

The attached table shows bid. ask, and mid-market levels for the 11 CME futures contracts (from earlier this morning). All bid-ask spreads are <= 2.0 points, although none is tighter than 1.4 points. In past expirations we’ve often seen one contract where value is being more hotly “debated” with a tighter bid/ask spread. Given that open interest for Nov. is 81 contracts (including 46 in CHI) there may be some traders looking to unwind (or roll forward) Nov positions. I’d expect some outright and short calendar spread trading over the next few days. The Nov /Feb calendar spread markets are wide at this point (not shown) probably due to the combination of changing seasonal factors (warm vs. cold states) and concerns about the underlying momentum in home prices. (Look for a blog on Nov /Feb spreads in the next few days.)

The Nov 2013 mid-market contract values are consistent with news headlines touting continued (but slowing) gains in all regional indices (at least those traded on the CME). The LAV, SDG and SFR will lead the year-over-year increases, while the Northeast areas of BOS, NYM and WDC will show as the laggards.

Finally, note that with the expiration of the Nov 2013 contract, the CME will introduce a new contract for Nov 2018. I would expect that most contracts roll out with 2-5% implied HPA gains over mid-2017 levels. With gains implied by such HPA, the forward level of CS indices will move even closer to full recovery versus 2006 “highs” in selected key regions. I would expect some push-back, increased interest in hedging as we get to “back to past high levels”.