Market Update: November 2023

What Parcl Traders Need to Know

• Six tradable Parcl V3 markets finished November down 0.5% vs. October, in aggregate (ppsft). Including markets that aren’t yet tradable on V3, performance was down 0.4% MoM.
• Some residential real estate markets, such as Denver, Boston, Brooklyn, and Austin experienced meaningful price declines MoM, while Los Angeles, Washington DC, and San Francisco were the MoM outperformers. The USA price feed fell 0.8% MoM.
• Miami Beach moves back into pole position in YTD performance at +12.6%, outpacing Los Angeles (+11.7%). The USA price feed is third overall in YTD performance at +9.8%. YTD laggards include Portland (-4.6%), Austin (-2.9%), and San Franscisco (-1.8%).
• Parcl V3 launched during November. Traders exited the month balanced long/short and total Open Interest stood at approx. $100K and growing rapidly (now up ~40% from 11/30).
• Stay tuned for more tradable markets very soon, including global metros such as Paris and London.

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The State of Real-Time Real Estate Prices

Final November data shows the fifth consecutive MoM decline across the seventeen North American markets, albeit a less severe one relative to October. The average performance in November was -0.4% vs. October in ppsft terms. This compares to -0.8% MoM in October and flattish MoM in September.

Some residential real estate markets, such as Denver, Boston, Brooklyn, and Austin experienced meaningful price declines MoM, while Los Angeles, Washington DC, and San Francisco were the MoM outperformers. The USA price feed fell 0.8% MoM.

Miami Beach moves back into pole position in YTD performance at +12.6%, outpacing Los Angeles (+11.7%). The USA price feed is third overall in YTD performance at +9.8%. YTD laggards include Portland (-4.6%), Austin (-2.9%), and Seattle (-1.8%).

All regional markets except Miami Beach are at least 1% off their all time highs, many of which were set within the past several months. The USA price feed is now -2.2% from highs.

Only two of 17 tracked North American markets are outperforming the USA Price Feed YTD (+10.7%): Miami Beach and Los Angeles.

What might this indicate? That regions outside of the most recognizable and populous (largely coastal cities) are driving most of the recent performance. This is supported by Parcl Labs data.

What factors are driving markets generally?

Real interest rates appear to have peaked, at least in the near term. 10Y TIPS (inflation protected treasuries) are down modestly in recent weeks, off their 15+ year highs set in November. Equity & other risk markets have risen in response. Inflation continues to moderate.

Volatility across markets remains subdued, as evidenced by the VIX Index. Volatility remains well below the spike in March around bank solvency concerns. This has led to an apparent stabilization in risk appetite.

The spread between 30 year mortgage rates and the 10 year U.S. Treasury yield also appears to be stabilizing; it remains modestly off its 40 year high. 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.

Important to note, the magnitude is diminished when adjusting for the effects of duration relative to the treasury yield curve.

The Case Shiller updated with June data on Tuesday 11/28, showing continued but slowing gains in prices across all major markets, missing consensus estimates. Real time data from Parcl Labs continues to pick this up as it happens, and, in the nearly two months since, show flattish/modest declines in performance across most markets. A few markets, such as San Francisco, Chicago, Boston, and Washington DC are solidly off their highs. Miami is the clear outperformer.

Importantly, July marks the tail end of the seasonal outperformance typically seen in many north/northeast markets. This seasonality showed up again in November in key North/Northeast markets like Boston, Philadelphia, and Chicago.

What are Parcl traders doing?

Parcl V3 launched during November. Traders exited the month largely balanced long/short and total Open Interest stood at approx. $100K and growing rapidly (now up ~40% from 11/30).

Stay tuned for more tradable markets very soon, including global metros such as Paris and London.