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Moody's Commercial Property Price Index Drops 3.3% In August, At Lowest Level Since 2002
Luckily the banks don't care about that $3 trillion footnote on their balance sheets known as CRE. Because if they did, they would all be insolvent: the Moody's REAL/Commercial Property Price Index index dropped by 3.3% in August, and is now 45.1% lower compared to the October 2007 peak. The attached chart says it all, or almost all - it actually says nothing about why banks are still trading at positive equity values.
Moody's summary points:
- The National — All Property Type Aggregate Index recorded a 3.3% price decline in August. The index is currently at a new recession low, 45.1% below the peak measured in October 2007.
- Commercial property prices are currently 19% below the Consumer Price Index since December 2000. Over time we expect the CPPI to revert to a long term trend line close to that of the CPI.
- The data suggest that the commercial real estate market has become trifurcated, with prices for larger trophy assets rising, prices for distressed assets declining sharply, and prices for smaller but healthy properties remaining essentially flat. One way to view index returns is by looking at the interplay of these three components of the overall market. The index again turned negative this month in part because large negative returns on distressed properties created a drag that outweighed the positive and flat results of the performing properties
For those who look at this and wonder how Simon Property and other REITs can be trading at clearly bubble levels, here is the full report. Let us know if you figure it out.
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'Mark to Fantasy' USA!
teh fed will buy them, they already own a few failed malls around here. i wish they would buy more worthless malls so we could all have a merry xmas when our reits go sky high!
'How can they be trading at clearly bubble levels'?
FED is the bagholder for it all, all-out war is on to inflate that garbage, they dont care if millions of people have to die.
That is correct sir!
Who doesn't understand this most basic fact of our current market and economy.
The market and financial institutions will be fine until Ben says they are not.
The economy will suck for anyone who is out of work; if you're out of work you will most likely never work again.
The federal reserve is the king. Like it, lump it or leave it, that is the way it is. Continue to question the power of the (printing) press. Question Newton's third law while you're at it because both endeavors are futile.
Watching for the market to go green. Wait for it... wait for it.....
Who cares about the economy? The FED can give us as much as money as we want without working, brothers. Hurrah for the magic FED and her horn of plenty.
Manna or Manna wa Salwa, sometimes or archaically spelled mana, is the name of a food that God provided for the Israelites during their travels in the desert as recorded in the Bible. It was said to be sweet to the taste, like honey. It is narrated in the hadith Sahih Muslim that the Muslim prophet Muhammad said "Truffles are 'manna' which Allah, sent to the people of Israel through Musa (Moses), and its juice is a medicine for the eyes."
http://en.wikipedia.org/wiki/Manna
Either that, or people are going to need to rent an apartment that is owned by a REIT because owning a home is not really an option right now.
Yet somehow the REIT's are trading at all time market cap highs.
Yield chasers is my thought.
Real estate is proving to be a much better hedge against inflation than most people realize.
I agree with you on this one. While prices may be depressed now, they will follow commodity prices in hyperinflationary environment.
"I agree with you on this one. While prices may be depressed now, they will follow commodity prices in hyperinflationary environment."
They will for sure go up in dollars, but will they in alternative currencies and in gold? ;-)
History showed that real estate is not a hedge against hyperinflation. It sure is better than paper dollars, but not as good as gold.
Gold is a good hedge as well, but who will give you 4% loan for 30 years to buy gold?
I got an offer from some finance company last week wanting to loan me a whole bunch of cash at 4.375% for 30 years. The kicker? It was FHA backed, but there were no restrictions on how I spent the money.
I'm assuming that it would've out a lien on my property though, so I didn't pursue it. Otherwise, I'd loaded up on PMs, leaving enough in cash to service the debt for a few years.
The only problem assets are deflating because the securitization market is broken. No more gas for the jet uncle ben is trying to jaw bone us down from 30,000 feet ....
The "worst of the worst" of the sub-prime CRE and SBA 7a lenders in the western U.S. is taking off.
Shorts need to be careful.
Banks and REITS...hell yeah! Buy Buy BUY BUYYYYYYY! What could possibly go wrong? /sarcasm
Answer your own question. In reality, what can go wrong?
Do you believe the fed is unable to cover any of their problems with enough cash? They aren't called TBTF for nothing.
There will be no failure until Ben says so, and Ben is not saying so.
Get over it shorts; prosperity, for those who matter, is here.
teh fed's latest acquisition target?:
http://www.latimes.com/news/local/la-me-crystal-cathedral-20101019,0,2990606.story
TYLER!!
I just wanted to order a pretty large batch of silver coins from the mint = ALL OUT!!!!
After that I went to fastcoin.com = ALL OUT!!!!
Something VERY STRANGE is going on in the silver coin market!
Ordered a goodly amount of Ag rounds from my favorite mint today. No problem. Still 6 - 8 weeks for delivery -- the same as it's been for the past 2 years
IYR, SPG, VNO, BPX....going to 6 digit valuations.
Market down? REITS up!
Evidently, you just can't possibly get them down. With IYR at $55 and soaring...it just seems on an unstoppable course to $250.
What a fucking joke.
Party on Wayne...Party on Garth.
How do you embed pictures???
Small business will not recover as long as CRE is overpriced.
Save the banks or save the economy. That's the choice.
Wrong answer for two years now, 21 for Japan.
How's that working for ya?
REITards can acquire distressed or preforming properties simply by issuing new stock - diluting current share holders - giving the illusion that they improving overall company performance because the NOI can currently service the debt and provide a single-digit return on the diluted stock. Wait till renewal - if bank financed. Traditional RE investors don't have the luxury of issuing new stock to create the equity component of the deal. Sellers are waiting around for some form of recovery. The waiting room is full and Dr. 'Big-Hands' Obama is waiting to check their prostrates.
For those who look at this and wonder how Simon Property and other REITs can be trading at clearly bubble levels, here is the full report. Let us know if you figure it out.
The answer is simple. W/respect to inflation - the stock market is anticipatory, prices (e.g. as reflected in the chart) are not. The chart only reflects past and current inflation - not future inflation.
It's who banks are still trading at positive equity values with that explain the why.
Today marks an important turing point for global markets and the USD strength I warned about has arrived.
http://stockmarket618.wordpress.com
Yeah real estate's been a really great hedge against inflation. We've had maybe 5% cumulative inflation since Oct 07 and CRE is only down 45% and falling at a mere 3.3% per month.
If you want to buy more hedges as effective as that one, just call anytime.
The Fed is going to Disneyland after the next crash
CRE concerns are so 2009. Ref: SRS (hitting an all-time low today intraday even as the market tanked.) Of course, when people stop talking about it is when opportunity awaits.
LOL:
SRS at the beginning of 2008: $630. Now: $20.
IYR at the beginning of 2008: $61. Now: $55.
Boy, those leveraged ETFs are a wonder: "daily returns" indeed. Interesting for black swan bets though.
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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