"This month is not unexpectedly bad news like the two previous months," Neal Elkin, president of REAL, in a release accompanying the newest Moody's/REAL National All Property Type Aggregate Index. "It could signal the beginning of a gradual tapering of the decline, the beginning of the final stage of the price correction from the lofty bubble of two years ago."

Nonetheless, the June index of 123.82 represents a 35.5% drop in prices over the past two years, and a 33.9% decline below the peak measured in October 2007. According to REAL, properties purchased between 2005 and 2008 have now suffered price drops of more than 20%, with the declines largest for those purchased two years ago.

Four months ago, properties purchased in 2004 had embedded price appreciation averaging 15.2%, but now those assets have seen values fall by 5.3%, according to REAL. While properties purchased in 2003 currently have positive imbedded appreciation, "those gains will be wiped out" if there's a 40% overall decline in values peak to trough. As it is, the REAL index is back to a level last seen in February 2004.

After declining 18.6% in the first quarter, national office values saw a 4.1% price gain in the second quarter, the only index in the new report to reflect an increase. The gain means office prices are off 27.4% from the peak, except in the West, where the drop of 15.4% from Q1 to Q2 meant a cumulative peak-to-trough drop of 34.9% in office values for that region.

Nationally, prices of retail assets fell 7.9% in Q2, according to REAL. On top of 18.6% declines in Q1, national retail prices have fallen 29.1% from the peak.

For apartment and industrial properties, the opposite was true: Q2 pricing performance was considerably worse than it was in the first quarter. Both sectors experienced drops of just 0.4% nationally in Q1, but apartments declined 16.3% and industrial plummeted by 20.4%. Nationally, apartment prices have incurred the steepest peak-to-trough decline at 32.2%, while industrial is not far behind with a falloff of 31.8% since the market peaked in Q3 '07.

REAL's indices for the top 10 MSAs all showed declines from Q2. However, they're uniformly in better shape than the national indices on a peak-to-trough basis.

For June, the total number of sales was up 25%, to 437 transactions. The dollar volume of $4.4 billion represented a gain of nearly 40% over May. Of these, 87 were repeat sales with a dollar value totaling $1.1 billion, nearly two and a half times the total measured in May. The Moody's/REAL indices are based on transaction data from Real Capital Analytics.

Instant Insights /

Price Index Suggests Declines Are Ebbing

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