April 20, 2010
In our previous post we indicated that risk was back, alluding to our belief that many investors are likely getting ahead of themselves in believing that we’ve seen the worst of it. In a market where the government is willing to artificially provide support to markets at nearly any cost (debt), it ultimately leads to further uncertainty given that excessive debt was one of the underlying factors that lead us into the current situation.
That said, for the past few months we saw the Moody’s/REAL Commercial Property Price Index (CPPI) putting up gains and some thinking that the ship has been righted. That short-lived trend has now reversed, and the latest numbers show a 2.6% decline. It’s very likely that we might see a number next month that again shows an increase, but what this demonstrates is that things can still go either way, and that is the risk many had seriously discounted for the past several months.
In addition to the raw number, the latest report reported the percentage of sales which are distressed. This number has been on a growth streak: in 2008 sales of properties classified as distressed were 4%. In 2009, it was 28%, and YTD (to Feb) the percentage was 32%.
- Moody’s Commercial Property Price Index Drops 3.4% in November
- Moody’s Commercial Property Price Index Continues Fall – Down 40% From Peak
- Green Street Advisors: CRE Prices Up 10%
- Moody’s/REAL CPPI Index Down .5% in March
- Moody’s Commercial Property Price Index August Update