Real Estate Data Still Shaky on Both Sides of Atlantic
Not much positive in the latest news on real estate, residential or commercial, US or Europe.
Moody’s announced a steep decline in commercial real estate prices in July as measured by Moody’s/REAL Commercial Property Price Indices. The CPPI was down 5.1% from June after having declined by only 1% the prior month. It is now 30.8% below what it was a year earlier and 38.7% below the peak measured in October of 2007.
The market has averaged about 375 sales per month for the seven months in 2009. Over the same time period in 2008, sales were averaging nearly 1,100 a month. – Moody’s Managing Director Nick Levidy
Moody’s Regional Property Type Indices show prices for apartments in the East performing significantly better than in other regions (and also better than other property types in the East). In the East, apartments have declined 6.0% in the past year, and 10.5% in the past two years, which is smaller than the decline of any other regional property type for just one year. Nationally, apartment sector prices have declined 24.4% in the past year.
Meanwhile, over at at Moody’s Economy.com, analyst Celia Chen says at least another decade will pass before housing prices return to peak 2006 levels, Housing Wire reports.
Chen wrote that housing prices will decline for another year, and that the Standard & Poor’s/Case-Shiller housing price index will fall 40% from the 2006 peak with housing bottoming out in Q210 before rebounding.
“The correction will be not only deep but also lengthy,” Chen wrote. “The national price level will not regain its 2006 high until 2020, a peak-to-peak housing cycle of 14 years.”
In its latest Housing Monitor, CreditSights worries that “The fact that the housing market has been supported by temporary fiscal stimulus only makes us more uneasy. Government initiatives have only likely resolved housing symptoms temporarily and not housing problems-that is high unemployment and the continued rise in mortgage delinquencies and foreclosures.”
- In a clear sign that the current housing momentum may have started to stall, the release of new home starts for August showed that starts for single-family homes dropped by 3% m-o-m, the first decline since January-and we believe this is due to concern over the looming expiration of the homebuyer tax credit. Mortgage applications to purchase a home have already begun to decline, down 10% in the week ending September 11, after reaching an eight month high in the previous week.
- Obviously, the looming expiration of the homebuyer tax credit has not escaped the eyes of politicians, as the Senate is assessing a bill to extend the homebuyer tax credit.
- We are also concerned that unemployed homeowners who are receiving benefits will eventually lose these government entitlements and remain jobless, raising our concerns over further mortgage delinquencies and foreclosures.
- Of course this has not gone unnoticed by politicians as top Senate Democrats are urging a quick extension of federal unemployment benefits.
Meanwhile, according to Equifax data reported by Reuters (and commented on by FT Alphaville), among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July.
Back to the commercial side, Standard & Poor’s analyzes delinquency rates in its North American CMBS Monthly Snapshot – August 2009. The overall rate rose to 3.73% in August, and included 12 delinquencies related to General Growth Properties (GGP)—down from 52 in June—and more than $1.2 billion of new multifamily delinquencies. “Our rating actions continued to be decidedly negative in August; we downgraded 518 classes during the month and also placed 15 ratings on CreditWatch negative.”
Excluding GGP related delinquencies, the August delinquency rate is 3.53%–after experiencing two consecutive monthly increases of 11%. Multifamily saw the largest increase in delinquencies among the commercial property types, rising to 6.02% on $1.2 billion of new delinquencies.
S&P also documents the woes of the European commercial sector in European CMBS Monthly Bulletin.
“European CMBS loan performance over August continued to reflect the effects of asset value and income deterioration with additional loans becoming delinquent, breaching covenants and moving into special servicing. Stresses at the loan level translated into issuer level losses, and in two transactions resulted in Standard & Poor’s Ratings Services lowering the rating on notes to ‘D’.
The FT reports that “there is mounting concern among industry professionals about how to restructure or refinance the $2,100bn of European commercial property loans, in particular the $200bn in CMBS.”
A report from a UK industry group that met with the Bank highlighted that the UK commercial property sector could be in negative equity until 2017 and undercapitalised by up to £120bn ($195bn) based on current conservative banking refinancing terms.
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