Market Update: January 2024

What Parcl Traders Need to Know

• Eight tradable Parcl v3 markets finished January approximately flat vs. December, in aggregate (ppsft). Including markets that aren’t yet tradable on v3, performance was down 0.3% MoM.
• Some residential real estate markets experienced meaningful price declines MoM; Los Angeles (-5.2%), Atlanta (-4.8%), and Philadelphia (-3.4%) stood out. Meanwhile, Austin (+3.6%), Boston (+2.8%) and Phoenix (+2.5%) were outperformers. The USA price feed grew 0.1% MoM.
• Miami Beach moved back into pole position in YoY performance at +9.4%, outpacing Chicago (+7.4%). The USA price feed represents the second best performer YoY at +9.1%. Laggards include Portland (-3.5%), Seattle (-2.4%), and Austin (-0.6%).
• Daily funding rates are averaging +0.08%, indicating a long bias amongst traders.
• Total open interest (OI) across all indices surged above $25 million — an all-time high. Miami Beach, Las Vegas and New York marked the highest OIs.

Parcl will have many more global locations coming soon! Stay tuned.

The State of Real-Time Real Estate Prices

Final January data shows dips across seven real estate markets (including several that aren’t tradable yet). MoM performance data shows an average decline of 0.02% across trading markets — an improvement compared to -2.4% in December, -0.4% in November and -0.8% in October.

The US price index was up 0.1% in January and 9.1% YoY.

Some residential real estate markets experienced meaningful price declines MoM; Los Angeles (-5.2%), Atlanta (-4.8%), and Philadelphia (-3.4%) stood out. Meanwhile, Austin (+3.6%), Boston (+2.8%) and Phoenix (+2.5%) were outperformers. The USA price feed grew 0.1% MoM.

Miami Beach moved back into pole position in YoY performance at +9.4%, outpacing Chicago (+7.4%). Miami Beach is the only tracked market outperforming the USA price feed YoY (+9.1%). Laggards include Portland (-3.5%), Seattle (-2.4%), and Austin (-0.6%).

San Francisco (-21.6%), Austin (-18.8%) and Portland (-18.4%) have experienced the most pronounced fall from highs.

What Factors Are Driving Markets Generally?

Volatility continues to be subdued after the March Spike.

Investor activity in 10 year U.S. Treasury yields indicate an unwavering confidence in the Federal Reserve cutting benchmark rates sooner rather than letter. However, with the larger US economy remaining largely resilient, the Fed has already indicated any such action could be delayed further than March — until inflation hits the Central Bank’s 2% target. 

A few indicators to keep an eye on [from Freddie Mac]:

• By January 31, the 30 year fixed mortgage rates had fallen to 6.63% (roughly 6 bps decrease week-over-week). Lower mortgage rates can make homeownership more affordable, potentially increasing demand for homes.
• 30 year mortgage rates are closely related to 10 year treasury yields. The spread between 30 year mortgage rates and the 10 year U.S. Treasury yield has been elevated for most of the past year, though it has declined sharply over the last month, now sitting just below 260 basis points. Should this mean revert further, lower borrowing costs could positively stimulate housing demand. 
• Similarly, rates for 15-year fixed rate mortgages — a particular favorite for owners looking to refinance — are at 5.94%, also on a steady decline week-over-week. 

Going into February, a few questions for investors to keep in mind:

• Will mortgage rates decline ahead of the spring homebuying season? 
• Will home prices deflate, and how will the market deal with limited inventory and increased demand?
• How the rates will change, and by how much? A meaningful rate decline might be required 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 +0.08%, indicating traders are fairly bullish. Standouts on a funding rate basis include San Francisco (+0.201%/day) and Miami Beach (+0.183%/day).

Total OI surged above $25 million, powered majorly by Miami Beach, Las Vegas and New York.