U.S. Property Values Drop Slightly in April

Property values nationwide dipped about 0.3 percent in April, as measured by the FTSE NAREIT PureProperty Index Series.

Brad Case, NAREIT’s senior vice president for research and industry information, noted that property values were firmer in the Midwest and East regions, both of which saw values increase in the range of 0.6 to 0.7 percent. On the other hand, property values declined by roughly 1.5 percent in the South and 1.1 percent in the West.

Case objected to claims that April’s numbers point to a downturn in the real estate market, and he noted that data since the beginning of the year have been “very strong.” All property types measured by the Pure Property Index Series suggest that property prices have gone up by nearly 3 percent during the first four months of the year, Case said. That translates to about a 9 percent pace for the year as a whole if the current rate sustains itself, he added.

“I think there are a lot of reasons to believe the current rate will sustain itself,” Case said. He stressed that underlying performance fundamentals of REIT-owned properties are positive, boosted by strong occupancy and rent growth and low levels of new construction.

Case underscored that new construction remains well below average levels on an historic basis. “A real estate market cycle is in danger of ending when construction gets way above its normal pace. We’re still below that,” he said.

Meanwhile, income from investments combined with capital appreciation produced total returns from property of about 4.25 percent in the first four months of the year, Case said. Total returns have been especially robust in the South at a level of about 6 percent on the year, he noted.