Coldwell Banker Premier Realty

Home Price Indices


Late spring figures arriving, new housing futures contract
Posted: June 27, 2011 by John McClelland

The Case-Shiller home price index continues to post declines, yet many of these observations are lagged. The current index release is for March with the April release scheduled for Monday. The March figure was off 1.1% from February, whcih is a sizeable slide. However, the late spring and early summer months are generally hotter selling seasons and this has yet to be reflected in the Case-Shiller numbers.

FNC, Inc has an alternative index based on a hedonic methodology that I really like. The formation of prices estimated by this index is similar to Case-Shiller yet it is released in a more timely manner, already showing April numbers. For Las Vegas, the drop was -.3% and the tail of the series looks quite flat.

The Radar logic formation looks closer to that of Case-Shiller for the most recent observations of Case-Shiller, up to March. Radar Logic does lead the Case-Shiller index by several months and produces a daily dataset. For Las Vegas, a clear downard bias in prices is still evident but the rate of change has slowed.

I like to look at year-over-year changes in the indices as it gives us an idea of how upside down some earlier purchases are. This helps us to gauge how many of these may roll over as a distressed sale, prolonging the recovery. On cash flow properties however, I generally don't care about these figures but rather look at the return profiles of individual properties on a cash flow basis, understanding that each is below their pre-bubble trend in price.

As a second note. Radar Logic is working with the Chicago Board of Trade to produce a futures contract based on their index. This is a very exciting development givent the weak level of interest on the Case-Shiller contracts. A contract size of $10 is small enough to get some non-institutional interest and I hope this brings added liquidity. If traded currently, on could buy a contract for $753.3 for the Las Vegas index although I am not clear if Las Vegas is part of their initial contract rollout. To read more, take a look at the CBOE website for contract specifics at http://cfe.cboe.com/Products/Spec_RPX.aspx.


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