CoStar reported that its value-weighted index of multifamily property prices rose 1.4 percent month-over-month in October. This index was down 7.1 percent year-over-year.
Note that the month-over-month price movement reported by CoStar varies significantly from that reported by MSCI Real Capital Analytics, which found a 0.3 percent decline. However, the less volatile year-over-year price change data for the two reports are much closer with MSCI reporting a 6.1 percent decline.
The value-weighted index of non-multifamily commercial property rose 1.4 percent month-over-month in October. This index is down 6.8 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 description at the bottom of this report.
Multifamily property prices show no clear trend
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 each of 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 multifamily property prices have been treading water since February. They are effectively unchanged since then, although they had a recent low in March and a recent high in June. Multifamily property prices are now down 25.2 percent from the high they reached in July 2022. They are also 13.3 percent below their pre-pandemic trend.
Prices for other commercial property types are also right about where they were last February. These prices are now 11.9 percent below their high point and 15.3 percent below their pre-pandemic trend.
The second chart shows the recent history of multifamily property prices and other commercial property prices based on this month’s data along with the estimates from last month. For purposes of this chart, the price indexes for both property groupings were set to a value of 100 in January 2020 so that the indexes could be plotted together at a scale that would show small price movements.
The chart shows that new transactions added to the data sets made only slight changes to last month’s index values, despite 193 new transactions (16.5 percent) being identified for September, 34 new transactions being identified for August and 18 new transactions being identified for July. CoStar does not identify how many of the new transactions were for multifamily properties and how many were for other property types.
Transaction volumes lower, sort of
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 falling transaction volumes appear more negative than they will subsequently appear. For example, CoStar reported that the transaction volume in October was down 6.3 percent from the revised level of the month before, but it was up 9.1 percent from the preliminary level for September reported last month.
CoStar reported that their initial transaction count for October was 1,306 repeat sales pairs. This is up from the 1,197 transaction pairs identified for September in last month’s report but down from the 1,394 transaction pairs identified for September in this month’s report.
The history of the revisions to the transaction counts for recent months is illustrated in the next chart. It shows that the number of transactions for May was initially given as 1,207 in the May report and has been revised in every subsequent report. While the size of the transaction count revision was largest in the next month’s report, additional transaction pairs for May continued to be identified in every subsequent report. The current report identifies 1,447 transactions for May. By contrast, transaction data for October only appears in the November report and we can expect it to be revised next month.
The preliminary dollar volume of transactions was reported to fall 9.7 percent from the revised level of the month before to $10.18 billion. However, the dollar volume of transactions increased 7.5 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 1,306 repeat sale pairs in September 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.
