CoStar reported that its value-weighted index of multifamily property prices rose 1.4 percent month-over-month in November. However, this index was down 5.2 percent year-over-year.
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 year-over-year price change data for the two reports are much closer with MSCI reporting a 5.7 percent decline.
The value-weighted index of non-multifamily commercial property fell 0.2 percent month-over-month, breaking a string of 3 months of increases. This index is down 2.8 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 signs of life
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 in a generally upward trend since April. Multifamily property prices have increased in 6 out of 8 months since then and are up 3.8 percent since March. Multifamily property prices are now down 24.1 percent from the high they reached in July 2022. They are also 12.4 percent below their pre-pandemic trend.
The current trend in prices for other commercial property types is less clear. Since February, these prices have been up in 5 months and down in 5 months. They are up 0.4 percent since January but down 1.7 percent for the year. These prices are now 11.8 percent below their high point and 15.6 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 values of 100 in January 2020 so that the indexes could be plotted together at a scale that would show the detailed price movements.
The chart shows that new transactions added to the data sets made only slight changes to last month’s index values, despite 165 new transactions (12.6 percent) being identified for October, 18 new transactions being identified for September and 3 new transactions being identified for August. CoStar does not identify how many of the new transactions were for multifamily properties and how many were for other property types.
Transaction volumes drop sharply
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 November was down 21.9 percent from the revised level of the month before, but it was only down 12.0 percent from the preliminary level for October reported last month.
CoStar reported that their initial transaction count for November was 1,149 repeat sales pairs. This is down from the 1,306 transaction pairs identified for October in last month’s report and down from the 1,471 transaction pairs identified for October 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 June was initially given as 1,068 in the June 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 June continued to be identified in every subsequent report. The current report identifies 1,299 transactions for June. By contrast, transaction data for November only appears in the December report. We can expect it to be revised higher next month.
The preliminary dollar volume of transactions was reported to fall 17.2 percent from the revised level of the month before to $9.20 billion. The dollar volume of transactions fell 9.6 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 1,149 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.
