By Dees Stribling, Contributing Editor
U.S. commercial real estate prices were up in May for the first month-over-month increase in six months, according to Moody’s Investors Service on Wednesday. In fact, the 6.3 percent rise in the Moody’s/REAL Commercial Property Price Index (CPPI) was its largest upward movement since Moody’s created the index more than 10 years ago.
Then again, the index was up from the pit of April, which had seen a record low for the CPPI. CRE prices in May 2011 were still 11 percent lower than during the same month in 2010, and fully 46 percent lower than the bubble peak of October 2007, notes Moody’s. About 27 percent of the CRE deals in May involved distressed properties, down from 30 percent in April.
“We are likely to see a pickup in post-peak repeat sales and expect such transactions to play an important role in helping drive the CPPI higher,” predicts Tad Philipp, director of commercial real estate research at Moody’s, in a statement. In other words, it’s possible that the bottom has passed for CRE valuations.
Existing-home sales edge downward
The National Association of Realtors reported on Wednesday that existing-home sales dropped in June as buyers got cold feet and cancelled more contracts than expected. Total existing-home sales declined 0.8 percent to an annualized rate of 4.77 million in June from 4.81 million in May. The June 2011 rate was 8.8 percent below the 5.23 million unit rate in June 2010, but June 30 of that year was the scheduled closing deadline for the homebuyer tax credit, and there was a mad rush to get in under the wire.
“The underlying reason for elevated cancellations is unclear,” says NAR Chief Economist Lawrence Yun in statement. “But with problems including tight credit and low appraisals, 16 percent of NAR members report [that] a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”
The NAR also reports that the national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. Distressed homes accounted for 30 percent of sales in June, compared with 31 percent in May and 32 percent in June 2010, so that aspect of the housing market seems to be stuck in an unpleasant neutral.
More sound and fury on Capitol Hill
With the debt-ceiling default countdown clock ticking quite loudly now, there’s still no resolution from Congress. Republican leaders were at the White House on Wednesday, but everyone is fairly sure that Republican leaders favor some kind of compromise with President Obama. The House rank-and-file is another matter, however.
Contrary to earlier reports, the president indicated on Wednesday that he’s open to a short-term kick of the debt-ceiling can down road, provided it was part of a larger deal that merely needed more work on the details. A number of plans are still being floated or advocated by various parties in the imbroglio, such as the “grand bargain” proposed by the president, or the not-quite-as-grand bargain proposed by the Gang of Six in the Senate, or the smaller deal (only a trillion or so in cuts) proposed when the grand bargain seemed to be nixed.
Wall Street took a breather on Wednesday after Tuesday’s massive gains, with the Dow Jones Industrial Average losing 15.51 points, or 0.12 percent. The S&P 500 was down 0.07 percent, while the Nasdaq edged downward 0.43 percent.