At first opportunity (but not for a few days) I will write an extended post on the cash flow dynamics of both CRE whole loans and CMBS. There seems to be too much confusion on the topic, which is at the heart of the "is the price fair/is it not fair" argument for the toxic asset bid/offer disconnect in the PPIP. Below is a good chart I tracked down which shows the most recent prices on sub-AAA CMBX tranches, and how this flows through in terms of spreads, loss rates, loss timings, average deal losses and a market-to-base case (flat loss assumption) ratio.
The Moody's/REAL Commercial Property Price Index posted a 5.5% decline from December, representing the largest drop in its history. Price are now down 19.1% from a year ago and 15.4% lower than two years ago.
New York, March 19, 2009 -- Commercial real estate prices as measured by Moody's/REAL Commercial Property Price Indices (CPPI) decreased in January by 5.5% from the previous month. The January decline was the largest in the history of the index, which has followed commercial real estate prices since December 2000.
Thanks to FT Alphaville for catching these bad boy charts. The article discusses the formation of serial bubbles in housing and equities in most countries except in Japan, where the bubbles were synchronized. And based on a historical ratio of house prices to stock market levels, either real estate still has a long way to drop or markets are due for a significant rally; as to which is more likely, reference any day's headlines.