CoStar reported that its value-weighted index of multifamily property prices fell 1.3 percent month-over-month in October 2023, reversing last month’s reported gain. This index was down 16.5 percent year-over-year.
The value-weighted index of non-multifamily commercial property fell 1.4 percent, month-over-month, in October. This index rose by a fraction of a percent year-over-year. 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), please see the section at the bottom of this report.
YoY multifamily property prices down
The first chart, below, shows the history of the value-weighted CCRSI’s since January 2016 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 multifamily property prices and prices for other commercial property types seemed to have returned to their long term trends in recent months, but they both fell behind their trends in October. Multifamily property prices were reported to be 2.6 percent below their long-term trend while prices for other commercial property types were 2.7 percent below their long-term trend.
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 2016. It also shows the average rates of annual price growth for the two property classes since January 2012.
The chart shows that the year-over-year growth in multifamily property prices is negative, but this reflects the elevated prices of multifamily properties one year ago as much as it does the low current rate of price appreciation.
Since January 2012, the average annual increase in multifamily property prices has been 8.2 percent while that of other commercial property prices has been 6.2 percent.
Transaction volumes up from last month’s report
An issue with monthly transaction volume reporting is that CoStar usually identifies additional transactions to tabulate over the next few months after the initial report, and these extra transactions tend to make initial reports of declining transaction volumes worse.
CoStar reported that the initial transaction count for October was down 7.7 percent from that of the prior month at 1,168 transactions. However, last month’s transaction count was revised higher by 12 percent as 134 additional transactions were identified for September. On an initial report to initial report basis, transactions were up 3.2 percent for the month.
The effect of these revisions is shown in the next chart, below. The cluster of bars at the left side of the chart represent the 6 reports that have been made so far as to the volume of transactions for May 2023. The preliminary volume for May 2023 reported in June was 1,173 transactions. This count was revised to 1,317 transactions in the July report and to 1,328 transactions in the August report. The current (November) report puts the May transaction count at 1,337. The 14 percent additional transactions identified between June and November can change the assessment of how May’s transaction volume stacks up against that of any month to which it is being compared.
The preliminary dollar volume of transactions was also reported to fall, declining 2.4 percent from the revised level of the month before at $8.9 billion. However, it was up 7.1 percent from the preliminary level reported last month.
The full report discusses all commercial property types. While the CoStar report provides information on transaction volumes, it does not break out multifamily transactions. The latest CoStar report can be found here.
CCRSI defined
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 1,168 repeat sale pairs in October 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. 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.
