CRE Prices Up Again

CRE prices edged upward, with a little help from job creation; distressed residential sales remain high; and some Americans are starting to trust the financial system again.

Commercial property prices edged up 0.6 percent in November from October, according to the latest Moody’s/REAL Commercial Property Price Index, which was released on Monday. The increase represented the third month in a row that CRE prices advanced.

Moreover, according to Moody’s Investor Service, commercial real estate prices were up 2.8 percent from November 2009, and up 6.4 percent compared with August 2010, which is beginning to look like an eight-year trough. The November 2010 index stands fully 27 percent below the October 2007 peak, which now probably represents a bubble-top the market is unlikely to see for years–with any luck.

One of the factors that helped turn valuations around, notes Moody’s, was job creation in 2010, the sine qua non of generating demand for CRE. Though not enough jobs have been created to seriously dent unemployment, the United States nevertheless added 1.1 million jobs during the year, apparently enough to put some kind of floor under commercial real estate.

Distressed residential property sales up too

Another measure of real estate, the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, was also released on Monday, and it shows that sales of distressed residential properties rose in December to 47.2 percent of the market, up from 44.5 precent in November. Campbell Surveys posited that the increase was largely from resurgent foreclosure velocity, after the robo-signing controversy slowed things down for a while.

Some places contributed enormously to that number. In California, for instance, some 66 percent of all residential sales involved distressed properties, while in both Arizona and Nevada, 62 percent of all residential property transactions were distressed-property transactions.

“The combination of increased property supply and growing homebuyer demand caused a blow-out month for home sales,” Thomas Popik, research director for Campbell Surveys, notes in a statement, but he doesn’t predict that the elevated level of foreclosure sales will endure: “January and February are typically the slowest months of the year for home buying, and we’ll still have a backlog of foreclosed homes coming on the market during the winter, so prices may come under pressure, too.”

Trust in financial system rising

According to the Chicago Booth/Kellogg School Financial Trust Index issued on Monday, trust in the American financial system has increased in the past two years, according to polling results. While the first issue of the index, back in January 2009, revealed that 20 percent of Americans trusted the financial system in the wake of the economic crisis, two years later trust has reached nearly 26 percent.

Still, while trust might have increased overall, the report also found lingering discontent toward mortgage lenders. It showed that even people morally opposed to strategic default said they would be more likely to default on their mortgage if they knew their lender had been accused of predatory lending.

Wall Street bounced upward on Monday, with the Dow Jones Industrial Average rising 108.88 points, or 0.92 percent. The S&P 500 gained 0.58 percent and the Nasdaq advanced 1.04 percent.