With the release of the January value of Moody's index of commercial real estate prices, we see that prices have increased three months in a row. This looks like a bottom, but it may still be early to call one. Nevertheless, it is encouraging to note that both residential and commercial real estate values have fallen by a similar order of magnitude since their recent highs, and both appear to have hit bottom. It would not be unusual at all for a bottom in prices to occur given a) the degree to which prices have fallen, b) the length of time prices have been weak, c) the emergence of a general economic recovery, d) the presence of extraordinarily accommodative monetary policy for the past 18 months. and e) the fact that mortgage rates are at or very close to all-time lows.
Indeed, if these markets couldn't find a bottom given all of the above conditions, then it would really be time to start worrying.
As further evidence of improving conditions in the commercial mortgage market, I offer this chart of CMBX prices from Markit:
Excellent post. That is all I dare say.
ReplyDeleteThe fact that there were practically no CRE sales might weaken the weight of the evidence....it appears that vehicle miles driven in January are declining on the margin and Chicago PMI is declining on the margin.
ReplyDeleteTax receipts are also declining on the margin.....looks like the margin is not looking too good right now...but margins can always change.
could there be a connection between fed purchases of fanny/freddy debt/mbs that perhaps is driving that chart? remove all the yield product and of course price will rise.
ReplyDeleteScott,
ReplyDeleteUS existing home sales fall for the third month in a row.......I know there is no three strikes and your out rule on the margin......but the margin is now down and at this rate, pretty soon the only Americans buying homes in our country will be government and health care workers.
septizoniom: If you're referring to the CMBX chart of rising prices, no. The Fed hasn't been buying any of that stuff, only new, plain vanilla mortgage pass-throughs. And those purchases have effectively ended anyway, as I noted in a post a week ago.
ReplyDeletehttp://scottgrannis.blogspot.com/2010/03/feds-mbs-purchase-program-ending-with.html
reduce high grade yield product and the price will rise across the available spectrum. you know that as an economist.
ReplyDelete