Thinner! San Francisco Home Price Futures Indicate Further Price Declines (But Futures Volume Is Razor THIN)

When the US housing bubble was in full steam, I was working with a major insurance company on a way to hedge home price risk in major metropolitan areas. Their risk committee thought housing was too risky (hence the reason for trying to hedge the risk). But to no avail.

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The problem with housing futures is … there is very thin volume in trading. Exactly one contract trade on March 12, 2019 at. 261.2.

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Aggregate open interest is a minuscule 20.

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This contracts with the SOFR futures with substantially larger open interest.

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Based on thin depth of trading, the trend line for San Francisco futures is downward sloping. And LAGGING the Case-Shiller home price index.

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If we look at the CFTC CBOE, CME futures activity, home price indices are so thin that don’t show up.

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Home price futures are thinner than other futures contracts, hence one must be careful.

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