Market Update: October 2023

What Parcl Traders Need to Know

• Seventeen tradable North American Parcl markets finished October down close to 1%, in aggregate. The average performance was -0.8% vs. September in ppsft terms. This compares to -0.02% MoM in September and -0.3% MoM in August.
• Some residential real estate markets, such as Boston, Philadelphia, and Chicago, experienced meaningful price declines MoM, while Denver, Miami Beach, and Portland were the MoM outperformers. The USA price feed gained 1.8% MoM.
• Denver moves into pole position in YTD performance at +13.8%, outpacing Miami Beach (+12.0%) and Boston (+10.6%). The USA price feed is fourth overall in YTD performance at +10.7%.
• Total October open/close volume was over $200,000 USDC (over $1M notional exposure), an all-time-high by over 12%.
• Parcl traders exited October leaning long; the aggregate split across all pools exited the month at 55% long / 45% short. This was up meaningfully from 90% short skew exiting September.
• Total open interest (OI) across all Parcl pools ended October above $310,000 in USDC terms, just off an all-time-high set the prior week.
• Paris and Ile-De-France are the most recently launched markets on Parcl. Stay tuned for more global locations coming soon!

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The State of Real-Time Real Estate Prices

Final October data shows the fourth consecutive MoM decline across the seventeen tradable North American markets, the largest since July (-0.9% MoM). The average performance in October was -0.8% vs. September in ppsft terms. This compares to -0.02% MoM in September and -0.3% MoM in August.

Some residential real estate markets, such as  Boston, Philadelphia, and Chicago, experienced meaningful price declines MoM, while Denver, Miami Beach, and Portland were the MoM outperformers. The USA price feed gained 1.8% MoM.

Denver moves into pole position in YTD performance at +13.8%, outpacing Miami Beach (+12.0%) and Boston (+10.6%). The USA price feed is fourth overall in YTD performance at +10.7%. YTD underperformers are Portland (-5.4%), Seattle (-1.9%) and San Francisco (-1.1%).

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 remains -1.4% from highs.

Only three of 17 tradable North American markets are outperforming the USA Price Feed YTD (+10.7%): Boston, Denver, and Miami Beach.

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?

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.

Treasury yields are up meaningfully in recent weeks, now well above their YTD lows in mid-April, while equity markets are up double digits. Inflation has fallen markedly over the same time frame.

The spread between 30 year mortgage rates and the 10 year U.S. Treasury yield has spiked somewhat after compressing markedly in weeks prior. It remains modestly off its 40 year high. Should this spread mean revert somewhat, 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 August data on Tuesday 10/31, showing continued but slowing gains in prices across all major markets. Real time data from Parcl Labs picked this up as it was happening, and, in the nearly two months since, show flattish performance across most markets. While many markets are up low/mid single digit percent from their end-August marks, a few, such as San Francisco, and Washington DC are off their highs and close to turning negative. Denver 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 in October in key North/Northeast markets like Boston, Philadelphia, and Chicago.

What are Parcl traders doing?

Total October open/close volume was over $200,000 USDC (over $1M notional exposure), an all-time-high by over 12%. Cumulative Parcl V2 notional volume reached ~$3.5M in October.

Parcl traders exited October leaning long; the aggregate split across all pools exited the month at 55% long / 45% short. This was up meaningfully from 90% short skew exiting September.

Total open interest (OI) across all Parcl pools ended October above $310,000 in USDC terms, just off an all-time-high set the prior week.