Inflation-Adjusted Prices Top Pre-Crisis Peak for First Time
Property prices increased again in August, pushing both apartments and commercial property prices over their pre-crisis peaks, reported Moody’s Investors Service and Real Capital Analytics.
The Moody’s/RCA Commercial Property Price Indices increased 1.6 percent in August, led by a 1.8 percent rise in core commercial properties. Apartment community prices rose 1.3 percent.
“While the CPPI topped its pre-crisis peak in September 2014 on a nominal basis, in August the CPPI topped it on a Consumer Price Index-adjusted basis,” Moody’s said. Prices now stand 14.5 percent above pre-crisis peaks on a nominal basis and 1.5 percent above peaks when adjusted for inflation. Apartment prices exceed their pre-crisis peak by more than 30 percent while commercial property prices exceed their prior peak by eight percent, Moody’s reported.
Central business district offices performed best over the past three months as prices increased 6.3 percent, the report said. CBD office price growth over the past three months exceeded that of next-best-performing segment suburban offices by more than three percentage points.
The 4.5 percent price increase seen in major markets over the past three months exceeded that of non-major markets by nearly three percentage points. Major-market prices now exceed their November 2007 pre-crisis peak by about 33 percent while non-major market prices lag major markets by about two years, Moody’s noted.
Commercial and multifamily real estate prices experienced a post-crisis decline of nearly 40 percent over 26 months following pre-crisis peaks, bottoming in January 2010. “The CPPI then took 57 months to regain its former peak in September 2014, and has since maintained its upward trajectory,” Moody’s said. “Consumer prices had a far smaller crisis-related decline than commercial real estate prices. The CPI declined about 3.5 percent in six-month period commencing in July 2008. It has since increased at a measured pace.”
While a few sectors still lag their 2007 peaks–the retail sector remains down 7.4 percent below and suburban offices are still 8.9 percent lower than eight years ago–all sectors have recovered at least 65 percent of their peak-to-trough loss, Moody’s said.Major market apartment prices saw the strongest recovery, with prices more than 50 percentage points above their pre-crisis peak.
“Apartment prices have benefited from strong underlying fundamentals and abundant liquidity,” Moody’s said.
