A variety of regularly published indices are used by investors for bench-marking, assessing tolerance for risk, and other investment measurement. When considering an investment in real estate for example, there are two indices that, based on actual property transactions, measure the average price appreciation for U.S. real estate; at the property level.
Both the Moody’s/RCA Commercial Property Price Index (CPPI) and the CoStar Commercial Repeat-Sales Index (CCRSI) are available for the aggregate U.S. commercial property market, as well as for important and influential market segments. Both index series are based on a version of the repeat-transactions methodology, popularized by Case and Shiller.
The CPPI and CCRSI measure the implied monthly change in market value for an investment property that has had “normal” levels of both economic depreciation and capital reinvestment. They do not measure income or total returns at the property level, nor do they measure returns to investors on property investments in which any debt is used.
Both the CPPI and the CCRSI are published monthly rather than quarterly, and both are based on actual transaction prices rather than appraisals. This means that both indices produce significantly more accurate measurements of movements in property values over time, when compared to appraisal-based indices, whether at the property level (such as the NCREIF Property Index) or at the fund level (such as the NCREIF ODCE Index, the PREA|IPD U.S. Quarterly Property Fund Index, or the Cambridge Associates Real Estate Index). In addition, both cover a significant amount of the commercial property market in the United States.
The U.S. housing market as a whole has improved dramatically over the past several years. In mid-2014, property prices vaulted to their highest level in more than five years, adding to signs of an improving real estate market recovery in the United States. With regards to residential real estate specifically, the median price of a new home increased a record 11.2 per cent in August 2014, to $256,000; the highest level since March 2007. When compared to August of 2013, the median sales price jumped 17 per cent, the largest rise since December 2004.