Commercial vs. Residential prices, June update

August 19, 2009

The Moody’s/REAL commercial real estate index for June was released today. Down just 1% compared to May, it suggests the pace of decline is moderating. The index was squarely in freefall the prior two months, declining 9% from March to April and 8% from April to May.

According to the index, prices are now down 35.5% from the Oct ’07 peak.

Case-Shiller data for June won’t be released till next Tuesday. But in May, the Composite 20 index actually rose slightly … for the first time since July 2006.

But don’t expect a V-shaped recovery for home prices (or for CRE prices for that matter).  While residential prices appear to have stabilized during the seasonally strong summer selling season, it’s likely they’ll turn back down later this year.

Even if prices stabilize around current levels, that would still imply large future losses for banks. They’re counting on prices to rebound sharply in order to avoid massive losses in their loan books.

(Click to enlarge in new window)


Just a reminder for everyone that comparing these two indices isn’t totally fair. There are literally millions of transactions that go into the Case-Shiller index. On the CRE side, there have been few sales recently to indicate pricing, as you can see below.  So you have to read Moody’s/REAL with a grain of salt.

(Click to enlarge in new window)



We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

Are those numbers seasonally adjusted, though? You always expect upward pressure in the summer.

Posted by joetauke | Report as abusive

I don’t put much value on MOM changes in almost any index, and certainly not real estate, commercial or residential. Aside from seasonality mentioned above (& summer is peak RE buying time, C or R), the monthly data are subject to substantial variability. My guess is that YOY CRE showed something on the order of a 25% drop, and I expect that pattern to continue at least into next year.

Posted by Lilguy | Report as abusive

It is NOT seasonally adjusted. Case-Shiller publishes a seasonally adjusted index, but I don’t believe Moody’s does. Not in the data I saw, anyway.

Posted by Rolfe Winkler | Report as abusive