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Prices on commercial real estate properties have slipped for three consecutive months and are now dangerously close to double-dip territory due to the large share of distressed transactions recently, according to ""Moody's Investors Service"":http://www.moodys.com.
[IMAGE]The agency reported Wednesday that commercial real estate (CRE) prices as measured by the Moody's/REAL Commercial Property Price Index (CPPI) fell 3.3 percent at the national level in February. The index is down 4.9 percent from 12 months earlier and only 0.8 percent above its post-peak low set in August 2010.
""There has been a clear distinction between the level of volatility when the top was forming in 2007 and the ongoing bottoming process,"" said Tad Philipp, Moody's director of CRE research.
[COLUMN_BREAK]""As the top was forming, there was ample repeat-sales transaction volume and few distressed sales,"" Philipp explained. ""In contrast, the bottoming process has seen large monthly price swings in part caused by fewer repeat-sales, a high percentage of which are considered distressed.""
By both count and balance the number of repeat-sales transactions in February was lower than in January. In February, there were 107 repeat-sales transactions totaling $1.1 billion, down from 116 repeat-sales totaling $1.45 billion the month before.
Moody's stressed that the number of repeat-sales transactions considered distressed remains at elevated levels.
The agency reports that approximately 29 percent of all repeat-sales transactions in February were distressed. Nineteen of the last 20 months have seen distressed transactions account for more than 20 percent of repeat-sales activity.
Moody's/REAL Commercial Property Price Indices are based on the repeat sales of the same properties across the United States at different points in time.
The agency says applying price changes measured in this way provides maximum transparency and methodological rigor, and circumvents the distortions that can occur with other commercial property value measurements such as appraisals or average prices.
