Tuesday, May 24, 2011

Moody's: Commercial Real Estate Prices declined 4.2% in March, Hit new Post-Bubble Low

by Bill McBride on 5/24/2011 06:35:00 PM

Moody's reported yesterday that the Moody’s/REAL All Property Type Aggregate Index declined 4.2% in March. Note: Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales and there are a large percentage of distressed sales - and that can impact prices and make the index very volatile.

The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement ...So-called trophy properties in New York, Washington, Boston, Chicago, Los Angeles and San Francisco are helping those markets avoid the drag caused by distressed asset sales nationwide, Moody’s reported.

The overall index shows “no sign of recovery,” Moody’s said.

Almost a third of all March transactions measured by Moody’s were considered distressed, meaning the properties’ owners faced foreclosure, had difficulty covering their mortgage payments or experienced other financial problems. It was the largest proportion of distressed property sales in the history of the index, Moody’s said.
Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

CRE and Residential Price indexes Click on graph for larger image in graph gallery.

CRE prices only go back to December 2000. The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

According to Moody's, CRE prices are down 8.5% from a year ago and down about 47% from the peak in 2007. Prices are at new post-bubble lows - and about at the levels of early 2002.

For more on CRE prices, here is the CoStar report for March prices.

Earlier:
New Home Sales in April at 323 Thousand SAAR, Ties Record low for April
Lawler: FDIC-insured institutions’ Real Estate Owned (REO) decrease in Q1
New Home Sales graphs

Last 10 Posts