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NEW YORK CITY-Although the pace of decline has continued to slow in recent months, commercial property prices have fallen nearly 44% since their peak two years ago, and now look more like what the industry saw in 2002. So says Moody’s Investors Service in its latest Moody’s/REAL Commercial Property Price Index report, released Monday.

The report, which covers transactions through the end of October, shows a 1.5% dip in prices nationwide during the month. That compares to the 8.6% monthly decline six months earlier, followed in May by a 7.6% slide.

“The pace of declines has tapered off since the large drops measured in April and May; however, further declines are anticipated,” the report states. With the 43.7% drop in the Moody’s/REAL National All-Property Aggregate since the October 2007 peak, “it is now necessary to look to properties purchased in 2002 to find positive price appreciation.”

In particular, the report notes the effects of price drops on loan to values are especially pronounced with more recent acquisitions. “”On average, loans originated at a 75% LTV in 2005 or later are now under water” with an average LTV today of 108%, says the report. Although most of the loans will not mature for several years, thus giving values a chance to recover, “later vintage loans are in a deep hole” and face increasing risk of term default as property fundamentals continue to erode.

On a sector-by-sector basis, office, nationally, has seen the biggest quarterly index drop. The indices, which are compiled for Moody’s by Real Estate Analytics using Real Capital Analytics data, show a 12.2% quarterly decline and a 30.1% year-over-year decline for office. Apartments’ year-over-year slide was greater at 34.1% nationally but the sector’s quarterly decline was smaller than that for office at 10.9%.

Helping to drag office down in the Eastern US, where it was the worst-performing of the major food groups, was the “poor performance” of the sector in New York City. The year-over-year decline of 38.1% for New York was slightly greater than the regional drop of 37.1% during the same time period.

The other two office markets with transaction volume great enough to measure at least annually–San Francisco and Washington, DC–fared considerably better, with 12-month declines of 21.3% and 27%, respectively. The other relatively local market–in this case, statewide–measured by the indices, Florida apartments, declined by 46.1% year-over-year.

In keeping with the Florida dropoff, the worst-performing of the four regions measured in the Moody’s/REAL indices was the South, with three of the four property sectors suffering annual price declines of greater than 30%. Of these, the steepest regional drop was incurred by apartments, off 51.8% from 12 months earlier. By contrast, the multifamily sector in the East saw a year-over-year drop in values of just 13.2%, while the West saw a drop-off of 18.9% and Southern California prices experienced a 15.9% decline.

Regionally, Southern California fared the best on a year-over-year basis, with no sector experiencing a price decline of 30%. Office prices there have declined 27.8% since October 2008, industrial prices by 24.2% and retail by 22.9%.

On the positive side, the Moody’s/REAL report says October’s monthly transaction volume was the year’s second highest at 407 sales, including 97 repeat sales, and dollar volume was the year’s greatest at $5.4 billion. That dovetails with RCA’s observation last week that transaction volume will continue to rise through 2010, and that the total of significant transactions next year “could easily top $100 billion,” more than double the $45 billion expected for this year’s tally.

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