U.S. Surreal Estate: Will Commercial Prices Fall Next?
Jul 9th, 2008 | By Doug Casey | Category: Real Estate InvestmentsWhile the residential real estate bubble has been well publicized, little attention has been paid to the fate of commercial real estate. All real estate has been on a massive bull run this decade, with home prices up 200% in six years and commercial real estate prices up a similar amount. But it’s clear that because of the credit crunch, these good times are coming to an end.
Since the second quarter of 2006, home prices (as measured by the S&P/Case-Shiller National Home Price Index) are down 17%, and falling faster every quarter. Commercial real estate prices (as measured by MIT’s Transaction-Based Index) have held their gains so far, but the bull run on shopping malls, apartment complexes, and office towers is faltering.
Although the first quarter of 2008 shows a 2.1% capital return for commercial real estate, the demand-side index continues to fall, dropping by 4.6%. This is the third straight quarterly drop, marking a cumulative decline of more than 14% since the Q2 2007 peak. With demand falling off a cliff, it seems likely that prices will soon follow, tracing a similar path to the decline of home prices.
Source: U.S. Surreal Estate: Will Commercial Prices Fall Next?
Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.