by Calculated Risk on 11/03/2009 02:14:00 PM

The different price indexes can be confusing ...

From MIT: MIT commercial property price index posts first increase in over a year

The 4.4 percent increase in the transactions-based index (TBI) for the third quarter is the first positive price change in the index in over a year, and the largest increase since before the market downturn began in mid-2007. While the price index is now 36.5 percent below its 2007 peak, it is not as low as the 39 percent deficit seen last quarter — suggesting that the U.S. commercial property market may have finally found a price bottom.

But this isn't the Moody’s/REAL Commercial Property Price Index (CPPI) that is reported every month. The CPPI showed commercial real estate prices fell 3 percent in August, and are down almost 41 percent since the peak in October 2007.

The transactions-based index (TBI) is a quarterly index for commercial properties sold by major institutional investors. According to MIT professor David Geltner, the TBI probably includes fewer distressed properties:

The types of properties and owners tracked by the TBI would generally be less subject to distress than those tracked by the CPPI.

A couple of points:

Typically prices fall much faster for commercial real estate than for residential real estate (prices for residential RE tend to be sticky and decline for several years, however CRE owners have far less emotional attachment to their properties).

It is very possible that CRE prices are near the bottom for non-distressed properties. It depends on if buyers are adequately discounting future increases in the vacancy rate and lower rents. It is a different story for distressed properties.

by Calculated Risk on 11/03/2009 12:02:00 PM

From MarketWatch: U.S. Oct. sales rise 2.6% to 132,483 vehicles

This is a comparison to Oct 2008.

Update: From MarketWatch: Chrysler U.S. Oct sales drop 30.4%

Toyota U.S. Oct. sales near flat

GM U.S. Oct. sales rises 4.1%

Once all the reports are released, I'll post a graph of the estimated total October sales (SAAR: seasonally adjusted annual rate) - usually around 4 PM ET.

by Calculated Risk on 11/03/2009 10:23:00 AM

From Bloomberg: Real Estate Price Plunge Makes U.S. Homeownership Perilous Path

Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment.

I know people who lost money in the early '80s housing bust in California, and they refused to buy again for many years. The same thing will happen this time.

Of course many homeowners are still stuck in their upside down homes, see: More walk away from homes, mortgages (ht Keith, Tim)

"It's increasingly a more important factor driving the foreclosure crisis," says Mark Zandi, of Moody's Economy.com. "As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn't make financial sense to hold on to their homes. That's going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time."

Enticing people to buy before they are ready leads to a nightmare, not a dream.

by Calculated Risk on 11/03/2009 08:38:00 AM

From Bloomberg: RBS, Lloyds Get $51 Billion in Second Bank Bailout

The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide. The government will fund about a quarter of Lloyds’s 21 billion-pound fundraising.

And from The Times: Banks defer bonuses in return for extra £40 billion

In return for receiving billions of pounds more of taxpayers' money, the Treasury said, both banks will not pay cash bonuses for 2009 to any staff earning more than £39,000 a year while the board of each lender will defer bonuses due for this year until 2012.

Stephen Hester, the chief executive of RBS, who took over the role from his disgraced predecessor, Sir Fred Goodwin, said today: “That does mean we will be making extensive use of deferred payments and payments in shares."

by Calculated Risk on 11/02/2009 09:40:00 PM

More from the Q3 GDP underlying detail tables ...

Note: Residential investment (RI), according to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Back in Q4 2008 - for the first time ever - investment in home improvements exceeded investment in new single family structures. This has continued through Q3 2009.

Click on graph for larger image in new window.

This graph shows the various components of RI as a percent of GDP for the last 50 years. The most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $154.7 billion Seasonally Adjusted Annual Rate (SAAR) in Q3, significantly above the level of investment in single family structures of $105.2 billion (SAAR).

Home improvement spending, as a percent of GDP, is close to the long term average. And Brokers' commissions are slightly above average (2009 was a solid year for agents).

Of course investment in single family structures is near the record low, and far below the normal level. Also far below normal is investment in multifamily structures. These two categories will not increase significantly until the number of excess housing units is reduced (I'll have more on the number of excess housing in the next few days).