Wednesday, June 24, 2009

CRE and Residential RE Prices

by Calculated Risk on 6/24/2009 11:31:00 PM

Here is the CRE report mentioned yesterday, from RC Analytics: Moody’s/REAL Commercial Property Price Indices, June 2009

The Moody’s/REAL National All Property Type Aggregate Index for April measures 135.31, a decrease of 8.6% from the previous month. The index now stands 25.3% below the level seen a year ago and 29.5% below the peak measured in October 2007. The index is 27.4% lower than it was two years ago. This report is based on data through the end of April.
...
The Moody’s/REAL Commercial Property Price Indices (CPPI) measure the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets at different points in time. ... A summary or short version of the repeat sales methodology is available in a Moody’s Special Report. US CMBS: Moody’s Publishes the First Commercial Property Price Indices Based on Commercial Real Estate Repeat Sales Data. Sept. 19, 2007. This is available on Moodys.com > Structured Finance > Commercial MBS > CRE Indices. A very detailed and complete explanation of the methodology is available in a White Paper from MIT. David Geltner and Henry Pollakowski. A Set of Indexes for Trading Commercial Real Estate Based on the Real Capital Analytics Transaction Prices Database. MIT Center for Real Estate. Sept. 26, 2007.
Note that the Moody's CRE price index is a repeat sales index like Case-Shiller.

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

Here is figure 1 from the report. CRE prices are back to 2004.

The Case-Shiller Composite 20 residential index is added in red (with Dec 2000 set to 100).

This shows residential leading CRE (although we usually talk about residential investment leading CRE investment, but in this case also for prices), and this also shows that prices tend to fall faster for CRE than for residential.