CoStar reported that its value-weighted index of multifamily property prices fell 1.34 percent month-over-month in April, an acceleration of last month’s reported decline. However, this index was up 4.0 percent year-over-year.
By contrast, MSCI Real Capital Analytics reported that multifamily property prices were down 0.4 percent for the month and down 1.1 percent year-over-year in April.
CoStar’s value-weighted index of non-multifamily commercial property fell 1.41 percent month-over-month in April. This index is down 5.1 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 turn lower
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 multifamily property prices reached a recent high in February but have declined for the last two months. Multifamily property prices are down 23.3 percent from their 2022 high. They are also 13.6 percent below their pre-pandemic trend.
Prices for other commercial property types fell this month, also for the second consecutive month. These prices are now 15.8 percent below their high point and 21.4 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 two month’s reports. For purposes of this chart, the price indexes for both property groupings were each set to a value 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 have had mixed impacts on the indicated pricing trends. Last month’s revisions to February’s price indexes raised them. However, this month’s revisions to March’s non-multifamily property price data lowered that price index’s value. Revisions to the multifamily property pricing data for March left that index nearly unchanged.
Transaction volumes higher than last month’s first 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 rising transaction volumes appear less positive than they will subsequently appear. For example, CoStar reported that the transaction volume in April for all property types was down 87 transactions (6.0 percent) from the revised level of the month before, but it was up 153 transactions (12.7 percent) from the preliminary level for March reported last month.
CoStar reported that their initial transaction count for April was 1,358 repeat sales pairs. This is up from the 1,205 transaction pairs identified for March in last month’s report but down from the 1,445 transaction pairs identified for March 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 November was initially given as 1,149 in the December report and has been updated in every subsequent report. While the size of the transaction count revision was largest in the next month’s report, additional transaction pairs for November continued to be identified in every subsequent report. The current report identifies 1,384 transactions for November. By contrast, transaction data for April only appears in the current (May) report and we can expect it to be revised next month.
The preliminary dollar volume of transactions was reported to fall 8.8 percent from the revised level of the month before to $9.18 billion. However, the dollar volume of transactions increased 2.8 percent from the preliminary level reported last month.
Distress lower for the month
CoStar also reported on the portion of sales that would be considered “distressed”. The next chart shows the distressed sales trends for combined investment grade and commercial grade property sales. Multifamily distressed sales are not separated out from those of other property types in this data. Because of volatility in the data, the chart presents the 3-month weighted moving average of CoStar’s distressed sales data.
The chart shows that the portion of sales that CoStar designates as distressed has been trending higher since late 2021. Distress trended upward through the end of 2023 but has shown no clear trend since then. The portion of distressed sales has averaged 3.2 percent since October 2023. Last month’s distressed sales were above this level while this month’s distressed sales were below it.
The full report discusses all commercial property types. 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. This month, CoStar identified 1,358 repeat sale pairs in April 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.
