Case-Shiller index changes since 1988

Home prices dipped nationwide for the fifth consecutive month in January, according to today’s Standard & Poor’s Case-Shiller Home Price Index, providing another blow to the housing market following last week’s disappointing new home sales data. The 20-city composite index was down 3.8 percent compared to January 2011 and fell 0.8 percent on a month-over-month basis. U.S. home prices are now roughly equal to those in early 2003 (see video after the jump). [more]

As demand for rental housing surges throughout the country, investors are venturing beyond Class A properties, or newer, well-leased buildings in centrally located neighborhoods of big cities, Bloomberg News reported. According to Real Capital Analytics, sales of apartment building rose 96 percent to $33.7 billion in 2010 from a year earlier. Class B properties and distressed acquisitions accounted for 33 percent of sales in the fourth quarter, compared with 25 percent a year earlier, said Sam Chandan, Real Capital’s chief economist. [more]

Commercial property sales in the U.S. this year are likely to fall to
their lowest level in 18 years, according to research firm Real Capital
Analytics. About $16 billion worth of commercial transactions will
occur this year, the lowest volume since at least 1991, said Dan
Fasulo, managing director at Real Capital Analytics, and Sam Chandan,
chief economist of Real Estate Econometrics. The commercial mortgage
default rate more than doubled in the second quarter, hitting 2.88
percent, and could hit 4.1 percent, the highest level since 1993, by the
end of this year. [more]

Capmark Financial Group, one of the largest U.S. commercial real estate lenders, posted a $1.6 billion quarterly loss Sept. 2, plummeting into financial distress and causing widespread speculation that a new crop of real estate losses may be in store for U.S. banks. Sam Chandan, chief economist at Real Estate Econometrics, said that many banks’ heavy investment in commercial real estate could cause continued hemorrhaging in the market. “We haven’t really experienced the full extent of the distress,” Chandan said. “When you look at community banks and some smaller regional banks, they tend to have a far greater concentration in terms of their exposure to commercial real estate.”

As the unemployment rate continues to climb, particularly among those in the 20- to 24-year-old age bracket, the rental market has taken a big hit. Nationally, 70 percent of that demographic rents rather than owns their home. While rental activity is up 2.4 percent from last quarter, it is still down a dramatic 58 percent from a year ago and listing inventory is up 29 percent from one year ago, according to a report from real estate appraisal and consulting firm Miller Samuel. CNBC noted that it only costs $70 more per month to own than to rent an apartment. Apartment Real Estate Investment Trusts, meanwhile, have been faring better than single-family home rentals in larger markets such as New York, because they are able to offer lower prices and include amenities in large rental buildings, according to Sam Chandan, president and chief economist of Real Estate Econometrics.

Commercial loan defaults are increasing even as residential
foreclosures begin to slow. A recent report from Real Estate
Econometrics found that the default rate on commercial mortgages rose
to 2.25 percent in the first quarter of 2009, up from 1.62 percent in
the fourth quarter of 2008, the biggest quarterly jump since 2003. Sam
Chandan, president of Real Estate Econometrics, said he expects the
default rate to hit 4.1 percent by the end of this year and rise to a
peak of 5.3 percent in the fourth quarter of 2011. That could mean
foreclosure for nearly $200 billion of the close to $3.5 trillion in
commercial properties around the country. [more]

From the New York Web site: Baskin Robbins is known for having 31 flavors of ice cream. This month,
the “Flavor of the Month” is “Coconut Grove” while last
month the flavor was “Purely Parfait.” In the world of commercial real estate, the preferred investment class or “flavor” of the year — not month — is the opportunity to pursue a real estate mortgage note that is in default. Investment brokers were selling office buildings, multi-family apartment houses and land for residential development at record highs in 2006 and 2007. Today, with limited amount of debt available for financing any real estate transaction, investment sales are down. [more]