Market concerns affect property price levels in October

Property prices did not change much in October.

With many investors and industry members concerned about the "fiscal cliff" and the economic situation, property management companies experienced commercial property prices stall in October.

Many investors are now waiting to see when these situations will be resolved, according to a report from CoStar Group. The Equal-Weighted U.S. Composite Index dropped 0.1 percent in October compared to the previous month, while the Value-Weighted U.S. Composite Index declined 0.8 percent.

Despite the declines from September's level, the figures were still improved from the same period one year earlier. CoStar's Commercial Repeat-Sale Indices report for October showed the Value-Weighted Index was 8.2 percent higher than the same month in 2011. The Equal-Weighted Index rose 9.7 percent during that time.

Many more positives occurred in the market, despite some pricing issues. The space between asking prices and actual sales prices dropped by 2 percent in October from the same month 12 months earlier, the report showed. Distressed property sales fell by nearly 15 percent, and is now at the lowest point in more than three years.

There was also a gain of 15.8 percent in the Investment Grade Index during the quarter ending in October compared to the previous three months, the report explained. This was common of the historical situation during the month, as this usually rises as the year comes to a close.

Fewer sellers became frustrated with the market in October, as the level of properties removed from the sales market fell more than 7 percent year-over-year, the report noted. Liquidity also made improvements during the month, as the length of time properties spend on the market fell by more than 5 percent quarter-over-quarter.

Recovery should continue at an uneven pace
The commercial real estate market currently experiencing pricing issues may be a signal of a mixed recovery, overall. This may be validated by the still positive aspects in the sales market.

According to a report from Moody's Investors Service, credit quality for commercial mortgage-backed securities may fall through next year. Additionally, underwriting won't fall to the quality levels experienced five years ago, when CMBS levels reached their highest points on record.

There also may not be a full recovery in the office and retail market for some time, the report added. This could affect the commercial situation as a whole, due to these having six in 10 of the total issuance for recent CMBS loans.

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