Tuesday, May 24, 2011

New Lows For Commercial Real Estate

Moody's reported this week that commercial real estate prices fell 4.2 percent month over month in March and are now down 8.5 percent from one year ago.

Prices have fallen 47% from the peak of the bubble and have now reached a new post bubble low.

The chart below shows the continued destruction.


The most fascinating part of the commercial real estate market is that as the fundamentals continue to grow darker and prices continue to fall, investor sentiment continues to rise month after month.

The chart below is the most recent poll from Marcus and Millichap which shows investor sentiment rising from 154 in the fourth quarter of 2010 to 164 in the second quarter of this year.


















Every sector reported a marked improvement in investor sentiment!

When interest rates rise on the ten year treasury, which are currently priced at bubblicious levels, it will simultaneously push cap rates higher on commercial real estate.

This will shock the investors that are pouring into the market today who will be slaughtered during the next leg down of our economic collapse.

No comments:

Post a Comment