Paper Economy - A US Real Estate Bubble Blog: Commercial Cataclysm!: Moody’s/REAL Commercial Property Price Index August 2010

Wednesday, October 20, 2010

Commercial Cataclysm!: Moody’s/REAL Commercial Property Price Index August 2010

The latest release of the Moody’s/REAL Commercial Property Index showed a notable monthly decline of 3.3% since July suggesting that the nation’s commercial property markets are continuing to slump through a tremendous downturn that has seen prices down some 45.31% since the peak set in October 2007.

The Moody’s/REAL CPPI data series is produced by the MIT/CRE but is noted to be “complimentary” to their alternative transaction based index (TBI) as it is published monthly and is formulated from a completely different dataset supplied by Real Capital Analytics, Inc and Real Estate Analytics LLC.

Labels: commercial real estate bust, CRE, economy

9 Comments:

Looks like commercial property prices are headed down again, after a pause for the stimulus. I suppose there's a good chance residential prices will soon trend the same.

How long will this continue?

I just read that in Japan, residential property prices are at about the same level they were in 1983. It's harder to default on a mortgage in Japan (gotta protect the banks!). So they're mired in a 20-year recession-like economy despite huge amounts of stimulus spending. Spending almost entirely designed to gum-up "creative destruction" and preserve the status quo.

Check out this graph:

http://economistsview.typepad.com/.a/6a00d83451b33869e20133f52b63d6970b-800wi

via:

http://economistsview.typepad.com/economistsview/2010/10/mary-daly-of-the-sf-fed-we-are-at-risk-of-a-long-period-of-sustained-disinflation.html

By Dagger, at 12:43 PM
Dagger,

Excellent ominous chart! Thanks... I'll look into that post soon but given what we know about the US economy it sure appears we could be following a similar trend.

By SoldAtTheTop, at 12:47 PM
We're in danger because our govt is dedicated to protecting the existing power structure. Banks, Wall Street, unions (esp teacher and govt unions), the insurance industry, the health-care industry, the military machine, all must be preserved. Only manufacturing/building/mining is allowed to wither. Except for GM, which is propped up for the sake of the UAW union.

Debate on the stimulus is always framed as:

1. In favor of deficit spending to preserve jobs and demand.

2. Against the stimulus (and thus in favor of high unemployment and slack in the economy) because govt debt is crippling.

But this is the kind of false dichotomy so common in propaganda. The stimulus preserves jobs (and bonuses) that are inefficient and wasteful. It ossifies a kind of economic slack that is hard to measure because the people are still being paid. They're just not doing anything useful.

And as for govt debt, it is not crippling if you're willing to accept ... inflation. Which is a bad thing, but sometimes necessary. It's an admission of defeat.

By Dagger, at 1:37 PM
What I'd like to see are clear arguments about the good/bad of the stimulus and MANY alternatives. Everything should be on the table. The debate should not be limited only to politically correct ideas.

By Dagger, at 1:42 PM
Dagger,

Good stuff.. I wish I could make a few clear arguments but I think I'm stuck on the epic government debt as being the worst outcome.

I don't think that Bernanke and the Fed are wizards... My sense is they are as incapable of dealing with real structural change as the central bankers in Japan have been over the last 20 years.

I don't think that they can easily create/control inflation as a policy tool... this is likely just a concept we all share because we still have some faith in the powers of the Fed.

It seems to me that it's much more likely that no policy tool from the Fed/Fed Govt is capable of dealing with the massive structural changes we are facing (boomer demographics, globalization, maxing out of 2 income households, etc., speculative euphoric culture, massive liabilities from Fannie Freddie and all the other unsustainable govt policy, etc., etc.) so we are effectively doomed to reap the ride from all the ills we sowed over the last five decades.

That brings up another point.

Can humankind simply always write its own ticket?

Is there no circumstance where the only collective response is to simply admit the massive errors that have been made and face reality?

By SoldAtTheTop, at 12:08 PM
Well, To be honest this subject can't really reflect the market, You need to check it again in a few months to see if it has been stabilized..

By commercial property insurance, at 8:51 AM
Dagger in my opinion you are right i was think opposite before read your discussion.

By Insurance Quotes, at 1:17 AM
I agree with dagger....prices are really heading down

By Insured Insurances, at 7:35 AM
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By certificationkey, at 4:48 AM