Comments on: How Bad 2009 Was for Building Sales And What 2010 Might Bring: A Jump in Sales Volume, Though Flat Pricing at Best

By: CRE Console

CRE Console — Tue, 09 Feb 2010 02:56:52 +0000

Interesting, I look forward to your post ReXX. I recall the announcement of the ReXX, but haven't heard much mention of it since its inception (in 2006?). I'll take a further look into it, too….

As for NPI and CPPI, they both serve a purpose depending on the audience. NPI is good for larger institutional investors, but smaller investors certainly need to pay more attention to Moodys/REAL CPPI. The problem with the CPPI is that by the time it is reported, the market has moved. Because it is such a lagging indicator, if one solely relies on the CPPI, more that likely, they'll miss the bottom… Maybe the ReXX can fill the gap?

By: Joe Stampone

Joe Stampone — Tue, 09 Feb 2010 01:31:10 +0000

Thanks for your comment. It's definitely a positive sign to see the bid/ask gap narrowing. Buyers and sellers are finally becoming more realistic. This compression can also be attributed to the number of buyers being forced to sell.

On a side not, I recently went to a talk on Real Estate Derivatives (I may write a post about it) with Vyapar Partners. Here's something interesting I took from the talk:

"One can, somewhat glibly, sum up the major indices thus: “NPI is what we think happened, Moody’s/Real is what actually happened, and ReXX is what should have happened”. Suffice it to note that NPI is down 24% from its peak while CPPI is down 43% from its peak."

By: CRE Console

CRE Console — Tue, 09 Feb 2010 01:16:21 +0000

We'd agree with Knakal's prediction of higher transaction volume, while pricing remains flat (who are we to disagree!). There continues to be an awful lot of downward pressure on prices (continued loan defaults, unemployment, weak housing, tax policy).

But, even in the face of such questions, MIT did observe bid/ask price spread compression, which would indicate buyers *and* sellers are becoming more realistic. This should bode well for transaction volume in 2010.

For more, see our post on MIT's Transaction Based Index and their Liquidity Metric at http://bit.ly/9Jiq5F. Before we found this metric, we knew there was a huge spread; it was just very difficult to quantify. MIT's Liquidity Metric has helped us do just that... it's a great resource.