Tuesday, December 30, 2008

Grubb & Ellis' Bob Bach Predicts Market Turnaround by End of 2009

SANTA ANA, CA--Some year-end thoughts and comments from Bob Bach, (top right photo) Senior Vice President, Chief Economist, Grubb & Ellis Co.

With the recession about to enter its 13th month, commercial real estate looks set to suffer through a cycle of rising vacancy rates, softening rental rates and increasing loan defaults, which has prompted industry trade groups to ask the federal government for help in refinancing debt.

The news is not all bad, however; an economic turnaround could begin by the end of 2009.

Barely detectable interest rates, low energy prices and various rescue packages that have already exceeded $1 trillion will help to reliquify the credit markets and jump-start the economy.
Capital temporarily parked in U.S. Treasuries and other short-term investments will be redeployed into stocks, bonds and real estate when confidence returns.

Due to the integration of global capital markets, that process, once it begins, could proceed fairly quickly, helping to reverse the rapid deterioration that occurred in September.

Despite the pain that is yet to come, the seeds of a recovery are being planted. Grubb & Ellis wishes you a prosperous and successful 2009.

For further information or to speak with Bob Bach, please contact Janice McDill at 312.698.6707.

Home Price Declines Worsen As We Enter the Fourth Quarter of 2008

NEW YORK,NY, Dec. 30, 2008 – Data through October 2008, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, with 14 of the 20 metro areas showing record rates of annual decline and 14 now reporting declines in excess of 10% versus October 2007.

The chart below depicts the annual returns of the 10-City Composite and the 20-City Composite Home Price Indices. Following the lead of the 14 metro areas described above, the 10-City and 20-City Composites set new records, with annual declines of 19.1% and 18.0%, respectively.

1 Case-Shiller® and Case-Shiller Indexes® are registered trademarks of Fiserv, Inc.

“The bear market continues with home prices back to their March 2004 levels,” says David M. Blitzer, (middle right photo) Chairman of the Index Committee at Standard & Poor’s.

“Both composite Indices and 14 of the 20 metro areas are reporting new record rates of decline. As of October 2008, the 10-City Composite is down 25.0% from its mid-2006 peak, and the 20-City Composite is down 23.4%.

In October, we also saw three new markets enter the ‘double-digit’ club. Atlanta, Seattle and Portland are reporting annual rates of decline of 10.5%, 10.2% and 10.1%, respectively.

While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and Mid-Atlantic South is not immune to the overall demise in the housing market.”

Three of the metro areas have given back, on average, more than 30% of the value of homes since October of last year.

Phoenix remains the weakest market, reporting an annual decline of 32.7%, followed by Las Vegas, down 31.7%, and San Francisco down 31.0%. Miami, Los Angeles, and San Diego were close behind with annual declines of 29.0%, 27.9% and 26.7%, respectively.

Monthly data also do not show much improvement in the national housing market. All 20 metro areas, and the two composites, posted their second consecutive monthly decline. In addition, six of the MSAs had their largest monthly decline on record – Atlanta, Charlotte, Detroit, Minneapolis, Tampa and Washington.

Most of the positive monthly data recorded in the spring and summer months, merely reflects seasonal patterns in home prices, as opposed to a turnaround in the downward spiral in national home prices.

Dallas and Charlotte faired the best in October in terms Dallas and Charlotte faired the best in October in terms of relative year-over-year returns. Still in negative territory, their declines remained in low single digits of -3.0% and -4.4%, respectively.

It should be noted, however, that both of these values are worse than those reported in the September data. In addition, Charlotte also reported its second consecutive largest monthly decline on record, down 1.8%. Cleveland and Denver were the only markets that showed any improvement in its year-over-year returns compared to last month’s report.

The table below summarizes the results for October 2008.

The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data. More than 21 years of history for these data series is available, and can be accessed in full by going to http://www.homeprice.standardandpoors.com/
The S&P/Case-Shiller Home Price Indices are published on the last Tuesday of each month at 9:00 am ET. They are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided.

Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length sales data. The S&P/Case-Shiller National U.S. Home Price Index tracks the value of single-family housing within the United States.

The index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly. The S&P/Case-Shiller Composite of 10 Home Price Index is a value-weighted average of the 10 original metro area indices.

The S&P/Case-Shiller Composite of 20 Home Price Index is a value-weighted average of the 20 metro area indices.
The indices have a base value of 100 in January 2000; thus, for example, a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the subject market


David Blitzer Chairman of the Index Committee Standard & Poor’s 212 438 3907

David Guarino Communications Standard & Poor’s 1 212 438 1471