CoStar reported that its value-weighted index of multifamily property prices increased 17.7 percent year-over-year in July 2022. The index fell 1.1 percent month-over-month.
The combined value-weighted index of non-multifamily commercial property rose by 6.0 percent, year-over-year, in July. This index fell 1.3 percent month-over-month. The other commercial property types tracked by CoStar are office, retail, industrial and hospitality.
For more information on the CoStar Commercial Repeat Sales Indexes (CCRSI’s), see the section at the bottom of this report.
Comparing property types
The first chart, below, shows the history of the value-weighted CCRSI’s since January 2012 for multifamily property and for all other commercial property considered as a single asset class. It also shows trend lines for the growth in the two CCRSI’s based on their growth in the period from January 2012 to January 2020. The indexes are normalized so that their values in December 2000 are set to 100.
The chart shows that both prices indexes exhibited steady growth in the years leading up to mid-2021. Since that time, prices for both commercial property segments rose much faster than the prior trend rate, with the deviation being much more pronounced for multifamily property than for other commercial property types.
The month-over-month decline in July for multifamily property prices is the largest since 2014. The July price declines for the two indexes represent only the second time that both indexes declined in the same month since the early days of the pandemic.
The second chart shows the year-over-year change in the value-weighted multifamily property price index and that for all other commercial property types since January 2012. It also shows the average rates of annual price growth for the two property classes over that time.
The chart shows that the year-over-year rate of increase in multifamily property prices in July was the lowest in a year. The year-over-year rate of non-multifamily commercial property price growth fell below the long-term trend rate for the first time since April 2021.
The annual increase in multifamily property prices has been 9.9 percent while that of other commercial property prices has been 6.8 percent. For comparison, MSCI reports that the average annual increase in multifamily property prices has been 11.1 percent while that of other commercial property has been 8.5 percent.
Transaction volumes reported to fall
CoStar reported that number of repeat-sale transactions was down about 27 percent in July, falling 619 from June’s level. Transaction dollar volume was also reported to be down from June’s revised level, falling 29 percent to $15.9 billion. However, the preliminary values for these metrics reported last month were revised sharply upward in the latest report, accounting for all the reported decline. The preliminary transaction count for July is 24 percent higher than the preliminary transaction count reported for June last month. The preliminary transaction dollar volume reported for July this month is 9.5 percent higher than the preliminary figure reported for June last month.
The full report discusses all commercial property types, but detailed data on each of the property types and regional data are only reported quarterly and so are not included in this month’s report. While the CoStar report provides information on transaction volumes, it does not break out multifamily transactions. The July CoStar report can be found here.
The CoStar report focuses on a relative measure of property prices called the CoStar Commercial Repeat Sales Index (CCRSI). The index is computed based on the resale of properties whose earlier sales prices and sales dates are known. The index represents the relative change in the price of property over time rather than its absolute price. CoStar identified 1,643 repeat sale pairs in July for all property types. These sales pairs were used to calculate the results quoted here.
CoStar computes CCRSI’s for a variety of property groupings, combining them by cost, region, property type or other factors, although some of these sub-indexes are only reported quarterly. The value-weighted index is more heavily influenced by transactions of expensive properties than is CoStar’s equal-weighted index. The value-weighted index is the focus of this report because it is an index whose value is reported monthly and for which CoStar breaks out multifamily property as a separate category.