On deck for tomorrow’s expiration day are US new home sales and the median price of those transactions, as well as Singapore’s Consumer Price Index, all for the month of April. Below I’ll highlight some high conviction trades for the three economic indicators.
New Home Sales to Soften
For new home sales I’m expecting a number at 670,000, which is below the 692,000 median projection. Rising mortgage rates and high prices likely slowed down transactions last month from March’s 724,000 seasonally adjusted annualized units, but probably not to a level below 635,000. In the past two years, closings have only been below that figure twice. In light of my estimate, those of my economist colleagues and the historical trend, I like the risk-reward profile of the “Yes” answer at the 635,000 threshold, which costs $0.82. I also like the “Yes” answers at 610,000 and 585,000 which are priced at $0.94 and $0.90, respectively.
Median New Home Prices Won’t Reach $445K
Home price appreciation has slowed down significantly as buyers face challenging obstacles such as elevated mortgage rates and all-time high prices which together have weighed heavily on affordability dynamics. Meanwhile, the median price of new houses sold has only exceeded $445,000 one month in history, October of 2022. For that reason, I think purchasing the “No” answer at the $445,000 threshold for $0.93 is a safe play. Additionally, I also like the “Nos” at $450,000, $455,000 and $460,000 which range from $0.94 to $0.96 in price.
Bias For Singapore CPI is Lower
To finalize, my expectation for tomorrow’s Singapore Consumer Price Index (CPI) is at 0.7% on an annualized basis, below the consensus from my economist colleagues of 0.8%. Another consideration is that, out of the 16 forecasters in Refinitv’s sample, the minimum projection is 0.5% while the maximum is 1%. I also believe the bias is to the downside shall the headline number differ from the anticipated 0.8%, due to slowing demand in the island-nation that has weighed on corporate pricing power. Indeed, the economy contracted in the first quarter as activity cooled. A modest beat can occur due to heavier import prices, but a significant move over the 0.8% expectation is improbable in my view. In conclusion, I like the “No” answer at the 1% threshold which costs just $0.48. Furthermore, I also like the risk-reward profiles of the “Nos” at 1.2% and 1.4% which are going for $0.85 and $0.92, respectively. Those with a higher risk tolerance and that want to go for a home run can purchase the “No” at 0.8% for just $0.16.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of May 22, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes” and “No” answers throughout different thresholds.
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