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Thursday, July 23, 2009

Real Estate: Commercial and Residential Prices

by Calculated Risk on 7/23/2009 02:02:00 PM

Here is a comparison of the Moody's / Real Capital Analytics CRE price index and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted - that is the name of the company (an unfortunate choice for a price index). 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.

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).

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.

There has been some discussion recently of the “de-stickification” of house prices in areas of heavy foreclosure activity. Price behavior for foreclosure resales is probably similar to CRE because there is no emotional attachment to the property. But prices in bubble areas like coastal California, with little foreclosure activity, will probably exhibit more stickiness and decline, in real terms, over a longer period than the high foreclosure areas.