Pricing Update
Hanging in there
Posted: March 31, 2010 by John McClelland
Yesterday the S&P/Case-Shiller numbers where released. In the seasonally adjusted tiered indices, each index registered a month-to-month increase with the exception of the middle tier which consists of homes priced between $126,631 and $196,595. This was mildly surprising given that we get a lot of requests for homes in these ranges but do not have a large amount of for-sale inventory. We have more listing inventory in the high range.
The breakdown for the listing inventory (offered for sale and not under contract) is as follows:
Low: 2,048
Middle Tier: 2,500
High: 3,630
Total: 8,178
Below you can see that month-to-month declines for each of the indices was stopped in November. This direction was sustained in December and for the low-tier, high-tier and aggregate indices in January. Remember that the data is reported with a lag. This may not constitute a full reversal in the direction of pricing until we see what happens with the expiration of the tax cut and how prices react to any increases in mortgage interest rates. However, we do see that a lot of investors are looking at residential assets first and are only gravitating towards commercial properties slowly. Generalizing, investors believe that most of the downward momentum in residential prices are already behind us but there is some room in commercial. In either case, if you buy smartly, you can purchase an asset with some very acceptable cap rates. I cannot say this for the rest of the nations metro areas as I believe there is still some room for further price declines. Las Vegas and Phoenix appeared to take a lead in correcting from the bubble, so all else equal, we should be in a better price position in fundamental terms.
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Source: Standard & Poors.
The breakdown for the listing inventory (offered for sale and not under contract) is as follows:
Low: 2,048
Middle Tier: 2,500
High: 3,630
Total: 8,178
Below you can see that month-to-month declines for each of the indices was stopped in November. This direction was sustained in December and for the low-tier, high-tier and aggregate indices in January. Remember that the data is reported with a lag. This may not constitute a full reversal in the direction of pricing until we see what happens with the expiration of the tax cut and how prices react to any increases in mortgage interest rates. However, we do see that a lot of investors are looking at residential assets first and are only gravitating towards commercial properties slowly. Generalizing, investors believe that most of the downward momentum in residential prices are already behind us but there is some room in commercial. In either case, if you buy smartly, you can purchase an asset with some very acceptable cap rates. I cannot say this for the rest of the nations metro areas as I believe there is still some room for further price declines. Las Vegas and Phoenix appeared to take a lead in correcting from the bubble, so all else equal, we should be in a better price position in fundamental terms.
Source: Standard & Poors.
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