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Moody's/REAL Commercial Property Price Index Picks Up Slightly After Two Months Of Declines
The Moody's/REAL Commercial Property Price index posted a slight gain in April, after two sequential drops, coming in at a 1.7% increase for the month. As Moody's notes: "This price increase follows two consecutive months of slight price declines. The index currently lies at 113.10 and has fallen 16.4% in the past year. Prices have remained choppy since the low of 107.98 that was recorded in October 2009. Since that low, prices have rebounded 4.7%. The peak of the index occurred in October 2007 and prices are currently 41.1% below the peak." Alas, in light of the ongoing collapse in real estate, it is a little difficult to take Moody's announcement with anything less than a smirk, wink and a knowing nod.
More from the report:
Notable Observations and Themes
- The National — All Property Type Aggregate Index measured a 1.7% increase in April. This is the first increase in the index since January. Price movements have been choppy since the index low recorded in October 2009.
- Three of the four property types in the East declined in prices over the past four quarters. Retail was the only sector to have an increase.
- With the exception of industrial, properties in the South underperformed their respective national property type index over the past four quarters.
- In the past year industrial prices in Southern California dropped 27.3%. This performance is significantly worse than the other three property types in the region, which fell between 2%-20%.
- The three major office markets measured significant annual declines, however, each outperformed its respective region. San Francisco experienced the smallest one-year decline at 10.7%.
- The Florida apartment market realized its largest one-year decline in value since index inception, dropping 29.9% over the last four quarters and leaving the index value down more than 50% percent from the peak four years ago.
Full report.
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All other data will be ignored, and this will be the reason for the markets triple-digit gains by the end of the day.
Well, that, and South Africa's surprise victory over France.
A 10 year rollback in pricing should be deep enough. But it isn't. The truth is hidden in the shadows, just like residential.
I can see the merit of "listening" to Moody's purges, IF you're a day trader. But can anyone, even said traders, believe even one biscuit from the Mood's box of shredded BS? ZH has a right to publish this crap for dissing, mocking and entertainment purposes; but the messenger - MSM - is far more culpable than the message - the Mood - imho.
I have some pretty savvy commercial RE buddies - and they are buying some trophy properties around so cal. They tell me it's time to buy. However, being that we have been friends for more than one cycle, I'm waiting to see what happens. I wish them the best.
I think when you see prices so much lower than what you lived with for a decades, its tempting to base your opinion not on the facts on the ground, but rather the relativeness of the low price...are your friends good-timing guys, did they sell at peak? I'd wait, just like the stock market, there will be rallies, but are they bear market corrections or not...
I should have finished my thoughts - we have been friends through more than one cycle, hence, I have seen them time well, and, get slaughtered. Personally, I do believe that the dynamics in Real Estate ARE different this time. Even if we are going through a normal boom-bust cycle, all you have to do is look back to the last one. The market broke summer of 1989 (so cal) and didn't begin to show life until 1996. And even then, there wasn't much more than low single digit appreciation until about 2000. Forget the upswing, we are talking seven years from peak to trough. And we are what, three to four years in to this one?
What I find fascinating is that during the last bust, institutions were unloading REO as fast as possible. This time around, they are holding back. This fact alone should be a clue as to the enormity of the problem.
Odds are that it is with OPM and if they have an equity in the deal it is matched by fees. A lot of funds raised that must invest or lost it.
Oooh, a fat cat found somebody to roll their loan portfolio. How is Mr. Buffett these days? Still bullish on housing and CRE for 2011?
Here is SD county there is also a pickup in sales tax revenues, which is heavily weighted toward car dealerships. Not hard to imagine there is some pickup here, a dead cat bounce anyway. This is partly due to the stimulus package, (government stimulating government) and local government puts those funds into redevelopment, they use eminent domain to condemn land for new businesses that generate higher tax revenues. Our local redevelopment agency has continued their project without interruption, spending millions. In San Diego they are finally going to create a new stadium for the Chargers, (corporate welfare is alive and well) through their CDDC, they are about to approve the study, a move which makes a new stadium a slam dunk for the owners, who had to hire a former Clinton attorney several years ago, and then threaten to leave town several times (hey SD is broke because of pension fund problems).
They still have to put it to a vote, but in this economy its bread and circuses. The circus is the local football team. San Diego city is one of the least taxed cities in the nation. Their fire department and police department are understaffed, (the last stadium deal gave the team free police assistance for traffic and crowd control, on game days, no way the new deal shouldn't be so sweet)
What that bump in commercial real estate is costing us is anyones guess. In my city we are laying off teachers, and building a new BMW dealership. When it comes to investing in the future, the future is now.
The apparent disconnect is simply due to the absolute size and complexity of the economy. Yes, banks are insolvent, unemployment is going to be very high for a very long time, housing prices are nowhere close to "reality" due to foreclosure inventory management, CRE is an explosion still waiting to happen, etc., etc.
However, the manner of addressing these large (and actually growing problems) has been to print money to replace the capital losses. As a result, the problems have been contained to the extent thay can be contained. Limbs have tourniquets on them and the bleed out has been stopped.
Will the patient survive in any recognizable manner is the question?
Those not directly impacted so far, and that is the large majority of people, thought pain was coming and when no pain has been forthcoming, have moved on mentally and believe that although there are problems, all will be good.
The United States cannot economically grow out of these fiscal problems. The federal public sector is on steroids. How Congress, et al can vote for anything that increases spending is mindboggling--even when they wrap it in make believe statements of how this new spending is being "paid for" by other provisions in the bill being passed.
Left to its own devices, the US can keep up this charade for quite a while. State and local bailouts by the Feds could keep it going even longer. Pension bailouts by the Fed could extend it even longer.
The day of reckoning must occur.
More likely will be a collapse with Europe that moves the US's day of reckoning forward. However, the Federal Reserve has been very busy helping the EU and others create the systems to keep pushing the problem out.