What Parcl Traders Need to Know
- Six tradable North American Parcl markets are down -2.08% MoM in aggregate ppsft terms. Considering markets that aren’t yet tradable on V3, performance was down 2.4% MoM.
- In 2023, the tradable v3 markets were up 2.4% — including the non-tradable markets, the performance was up 2.1%.
- MoM, some real estate markets like Denver (-7.1%), San Francisco (-6.8%) & Washington D.C. (-5.9%) experienced meaningful price declines.
- In 2023, Portland emerged the biggest laggard (-7.9%), followed by San Francisco (-5.9%) and Washington D.C. (-3.8%).
- Parcl traders remain balanced, ~50:50 in all markets, with daily funding rates averaging at 0.14%.
- After the Parcl v3 launch in November, total open interest (OI) across all indices surged above $7 million — an all-time high. Miami Beach, Las Vegas and San Francisco marked the highest OIs.
Parcl will have a lot more global locations coming soon! Stay tuned.
The State of Real-Time Real Estate Prices
The final December data shows the sixth consecutive MoM dip across seventeen real estate markets (including the ones that aren’t tradable yet). The decline was pronounced (at -2.4%) compared to -0.4% in November and -0.8% in October.
Some residential real estate markets, like Denver, San Francisco and Washington D.C. experienced meaningful price declines MoM, while Atlanta and Las Vegas were some of the outperformers. The USA price feed fell 1.6% MoM.
Over the year, Portland, San Francisco and Washington D.C. emerged the laggards, while Miami Beach was the only market that outperformed the US index.
All markets were down at least 3.3% off their ATHs, with the US index lagging 3.8%.
Miami Beach, Chicago and Los Angeles emerged the top performing markets in 2023. What might this indicate? The most recognizable and populous (largely coastal) cities are driving most of the recent performance.
What Factors Are Driving Markets Generally?
Inflation continues to moderate.
Volatility across markets remains subdued, as evidenced by the VIX Index. Volatility remains well below the spike we observed in March.
The Federal Reserve has expressed its intention to reduce interest rates three times in 2024, marking a dovish shift in monetary policy. The spread between the 30-year fixed-rate mortgage and the 10-year treasury yield has narrowed modestly — after sitting at over 300 bps earlier. Should this spread continue to mean revert, and the 10y Treasury remains unchanged or continues to decline, this could perhaps create a modest tailwind for residential real estate demand near term.
However, there will be other factors to be taken into consideration in 2024:
- Already inflated home prices, and how the market deals with restricted inventory and increased demand
- How the rates will change, and by how much. A meaningful rate decline is needed for sellers to enter the market again.
What are Parcl traders doing?
Parcl traders are balanced ~50/50 in all markets, with daily funding rates averaging at 0.14%.
Total OI surged above $7 million, with Miami Beach and Las Vegas the highest OI markets.
Disclaimer: This article has been written purely for educational purposes. This article is not intended to be investment advice of any kind.
