In the midst of bearish short-term home price forecasts, it might be useful to step back and see what the market is “saying” about home prices (or at least prices on the Case Shiller index) over the next few years. The graph below shows the mid-point price (splitting the bid and ask quotes) on both the Case-Shiller 10-city index (bolded in black) and the ten regional contracts.
Note that while market quotes are in line with current pessimism, that expectations turn more bullish once we get to 2013. In fact, in certain areas (the three Northeast regions of WDC, BOS and NYM, and their 24/7 sister city on the west coast (SFR)) prices turn up sooner, and more sharply. Alas for DEN and CHI, the future doesn’t seem so bright.
So, potential good news on forward price levels, potential good news for certain regions and potential good news in that real estate markets are moving away from being so highly correlated.
There are a number of possible inter-city trade themes that one can employ. Please email me (johnhdolan@homepricefutures.com) if you care to discuss some swaps.