Commercial Real Estate Prices decline in December
An independent mortgage financing blog, Housing Wire, reports that “residential mortgage market woes have extended into commercial real estate.” Moody’s investor services reported Tuesday that the “commercial real estate price index used by the agency registered a second consecutive monthly decline, and the third in the past four months.” Information regarding the price drops according to Moody can be read below.
Moody’s/REAL Commercial Property Price Indices fell by 1.5 percent in December — the fourth-largest monthly drop in the 84-month history covered by the price index.
“The last few months of the index have represented a bit of a plateau, but one with more ‘down months’ than ‘up months,’” said senior vice president Sally Gordon, coauthor of the report. “The asymmetry of the number of months when prices increased or decreased is striking and clearly indicative of where we are in the real estate cycle–the beginnings of a downturn after a long run-up in prices.”
One surprise in December, according to Moody’s, was that the volume of the repeat sales transactions remained robust during the month — usually a sign of market strength. In December, the Moody’s/REAL CPPI captured 352 transactions totaling $7.1 billion.
“Although December is often a more active month for transactions as some borrowers and/or lenders are eager to close before the year-end for one or another financial reason, the jump in volume in December might turn out to be atypical before a softer pace sets in,” said Gordon.
Pricing for the market has been steadily dropping and decreasing the value of many properties up for sale. Investors will be less likely to pump in money for lenders who are receiving broken mortgage promises as they are forced to increase rates to make up for their losses. The mortgage problem these days are becoming more frequent as can be seen by many foreclosures and quitting of mortgages.
Such a decrease in commercial real estate will likely result in an increase on second mortgage rates.
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