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Update on CME BOS futures
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Fri Apr 15, 2016 8:57 pm GMT    Post subject: Update on CME BOS futures Reply with quote

Here's an update (i'm going to try to attach a graph) on what the CME futures are saying about BOS prices over the next few years. I've done a recent deeper dive into BOS (in prep for a lecture at Babson) and the range of home price performance across smaller regions is stunning (no surprise to those of you who live there). So these are prices on an index which represents an AVERAGE across an area from into NH to the Cape bridges. Some areas have (and probably will) experience very different performance from the BOS index.
That said, I believe that while it's "location, location, location" the success of the BOS economy (e.g. jobs, universities, GE moving there) will have some impact on houses across the region.
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Fri Apr 15, 2016 9:01 pm GMT    Post subject: Reply with quote

OK, somebody please remind me how to post a graph.
Thanks,
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admin
Site Admin


Joined: 14 Jul 2005
Posts: 1821
Location: Greater Boston

PostPosted: Fri Apr 15, 2016 9:13 pm GMT    Post subject: Reply with quote

There are instructions here:

http://www.bostonbubble.com/forums/faq.php#24

Click the "Img" button above, paste the URL of your image, and then click the "Img*" button.

If you don't have a URL for your image, you can upload it to http://imgur.com/ to get one.

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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Mon Apr 18, 2016 4:57 pm GMT    Post subject: Reply with quote

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admin
Site Admin


Joined: 14 Jul 2005
Posts: 1821
Location: Greater Boston

PostPosted: Mon Apr 18, 2016 5:18 pm GMT    Post subject: Reply with quote

I fixed the URL for you. It was pointing at the HTML page http://www.homepricefutures.com/?attachment_id=3721 and needed to be the URL of the image itself: http://www.homepricefutures.com/wp-content/uploads/2016/04/BOS-Apr-2015.jpg

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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Mon Oct 16, 2017 1:42 pm GMT    Post subject: Update to BOS futures Reply with quote



This is John H Dolan, the market maker in the CME Case Shiller home price index futures. Here's a set of graphs and tables that should provide a snapshot of trading in the BOS contracts. Yes, no volume in September, but with tight (actionable) bid/ask spreads, and options having been re-introduced, I'm hopeful that interest will pick up.
Questions?
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PostPosted: Fri Dec 15, 2017 2:36 pm GMT    Post subject: BOS_Dec 15 Reply with quote

Here's an update on the BOS market since my last post in Oct. BOS has been one of the better performing contracts with the X18 (Nov 2018) contract moving up from 212.6/215.0 to 215.0/217.6.
Alas, still no activity. I'm open to facilitating any retail inquiry, or to answering questions on the contract.
John
[img]http://www.homepricefutures.com/wp-content/uploads/2017/12/BOS_Dec-15_2017-1.bmp[/img]
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Fri Dec 15, 2017 2:40 pm GMT    Post subject: BOS_Dec 15_ CME Futures Reply with quote

Tried last time without logging in and using a bmp file. Let's try again:

Here's an update on the BOS market since my last post in Oct. BOS has been one of the better performing contracts with the X18 (Nov 2018) contract moving up from 212.6/215.0 to 215.0/217.6.
Alas, still no activity. I'm open to facilitating any retail inquiry, or to answering questions on the contract.
John
[/img]
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 170
Location: Cambridge, MA

PostPosted: Mon Dec 18, 2017 2:12 pm GMT    Post subject: Reply with quote

For those of us who are not economists, can dumb this down and translate implications into some actionable home buying and selling decisions in 2018, 2020 and beyond?
_________________
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog/
http://twitter.com/RealEstateCafe
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Mon Dec 18, 2017 2:35 pm GMT    Post subject: interpreting CME quotes Reply with quote

The CME futures settle on the index value at some future point in time. So if the spot BOS index is 206.4, these quotes show that someone is willing to buy the Nov '18 contract at 215, while someone is willing to sell that contract at 217.6.

The contract prices are similar to saying that you'd expect the Patriots to beat the Jets. While you might like to bet the Patriots even up, the debate is how many points they'd have to give to have interest on both sides of the bet.
Similarly here, both the bidder and seller are quoting prices that show gains in the BOS index through Nov '18. The debate isn't whether the BOS index will rise, but by how much (or in effect, what should be the line).

What can one do knowing this market exists? First, one can just observe that people are willing to put money behind their views (each price point =-$250). It's a thinly traded market, but you can add these quotes to any other analysis you do, or forecasts you read.

Second, for those who understand futures, you can trade on these prices (or post quotes at other levels) either to speculate, or hedge. For example, someone who is concerned about having too much Boston-related real estate exposure, might consider using the contracts as a hedge. There are critical issues -to include how your exposure might move relative to the Case Shiller BOS index that you'd need to estimate before going forward, but the contracts are based on residential real estate prices. I'm not aware of another financial instrument that is as good a "pure play" on home price expectations.

Net, in general anything that you can do with another cash-settled futures contract, you can do here. The biggest benefit is public pricing of levels that traders are willing to bet, but hedging/speculating opportunities also exist.

I'd be happy to offer more info here or off-line.
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Mon Dec 18, 2017 2:36 pm GMT    Post subject: interpreting CME quotes Reply with quote

The CME futures settle on the index value at some future point in time. So if the spot BOS index is 206.4, these quotes show that someone is willing to buy the Nov '18 contract at 215, while someone is willing to sell that contract at 217.6.

The contract prices are similar to saying that you'd expect the Patriots to beat the Jets. While you might like to bet the Patriots even up, the debate is how many points they'd have to give to have interest on both sides of the bet.
Similarly here, both the bidder and seller are quoting prices that show gains in the BOS index through Nov '18. The debate isn't whether the BOS index will rise, but by how much (or in effect, what should be the line).

What can one do knowing this market exists? First, one can just observe that people are willing to put money behind their views (each price point =-$250). It's a thinly traded market, but you can add these quotes to any other analysis you do, or forecasts you read.

Second, for those who understand futures, you can trade on these prices (or post quotes at other levels) either to speculate, or hedge. For example, someone who is concerned about having too much Boston-related real estate exposure, might consider using the contracts as a hedge. There are critical issues -to include how your exposure might move relative to the Case Shiller BOS index that you'd need to estimate before going forward, but the contracts are based on residential real estate prices. I'm not aware of another financial instrument that is as good a "pure play" on home price expectations.

Net, in general anything that you can do with another cash-settled futures contract, you can do here. The biggest benefit is public pricing of levels that traders are willing to bet, but hedging/speculating opportunities also exist.

I'd be happy to offer more info here or off-line.
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 170
Location: Cambridge, MA

PostPosted: Mon Dec 18, 2017 2:55 pm GMT    Post subject: Reply with quote

@HomePriceGuy Thanks for your quick response. As a buyer agent, I routlinely hear listing agents spinning stats into rising price expectations. The latest example was that multifamily homes have sold at 107% of their asking prices in Boston over the past six months.

Using MLS data over three years, my analysis of bidding war activity involving her own brokerage debunked the point she was trying to argue:

"If you want to buy this home, you need to pay 7% over asking price."

My assumption is that BostonBubble readers are ordinary homebuyers, not speculators or investors hedging bets on futures; rather first-time homebuyers who are trying to make informed decisions that will make sense two or ten years from now. My guess is that there are also baby boomers who are trying to decide when to downsize, which means when to sell.

How does your data inform their situations, particularly when price expectations may be driven by "external demand." See CROWDSOURCING question related to role parents are playing in speculative cycle here and in Toronto:

https://twitter.com/RealEstateCafe/status/942748634642296833
[/url]
_________________
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog/
http://twitter.com/RealEstateCafe
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Guest
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PostPosted: Mon Dec 18, 2017 3:04 pm GMT    Post subject: Reply with quote

It"s all going to crash
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 170
Location: Cambridge, MA

PostPosted: Mon Dec 18, 2017 3:11 pm GMT    Post subject: Reply with quote

@Guest -- Can imagine that you speak for millions when you say the market is going to crash, at least in Ottawa where they're trying to impose market calming reforms, see link below.

http://bit.ly/16FairREforms

BostonBubble readers, which of the reforms proposed in the link above are necessary / would be effective in our market?
_________________
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog/
http://twitter.com/RealEstateCafe
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homepricefuturesguy



Joined: 15 Aug 2010
Posts: 19

PostPosted: Mon Dec 18, 2017 3:17 pm GMT    Post subject: Reply with quote

First, I agree (w/ Real Estate Cafe) that futures are not for all. I post here to offer yet another tool that those in the industry might incorporate into their analysis. Disclosure of market prices doesn't prevent a bubble from forming (or prick one) but it does show that money is being put at risk. Use the data, or not, but it's there.

Second, there is the question of what first-time homeowners do when they want to buy in an area where speculation might be driving prices up faster than fundamental value. Programs that allow for shared appreciation are a way of getting the house you want, without 100% buying into the price upside. There are some interesting shared-equity/shared appreciation mortgages that are worth looking into.

Further, someone looking to buy a house 2-3 years from now, could, in theory, buy the Nov '19/ Nov '20 futures. That way they have exposure to the BOS index should prices rise faster than implied by the contract prices.

Third, your comment on "external demand" is important to understanding local price dynamics. Whether the examples you cite (e.g. parents assisting children in first home purchase) or Chinese investors buying in Vancouver, Toronto, and now Seattle, or retirees pre-buying their retirement homes in Phoenix/Florida, all show that the demand side can change much quicker (in both directions) than the supply side (and can overwhelm local conditions).

Alas, Boston looks so good from the outside (the Palo Alto of the East Coast) that it doesn't surprise me that home prices are (and per the contracts) will continue to move higher, over the near term.
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