Muoio: The apartment sector continues to see robust fundamentals fueling valuations gains in most metros, but the story is starting to waver market by market. While, on a national level, it is very possible that apartment valuations will continue to expand throughout the year, in markets such as New York City, San Francisco and others seeing high supply additions, valuations may prove fickler.

GlobeSt.com: Which factors might slow down or reverse the contraction?

Muoio: First, it is important to note that this was just one month of contraction, so we don't want to read too much into it, since pricing in all sectors except hotel remains solidly higher than a year ago. However, the Nowcast is designed to capture shifts as they are occurring—so the fact that we saw weakness across segments and regions is a yellow flag of which investors should take note. This is particularly true when you consider the timing of this contraction, which has come amid both the rise in interest rates and uncertainty regarding many policies under the new federal administration. In terms of what could improve the environment for CRE pricing, it really comes down to an acceleration in economic growth or some give-back from the recent rise in interest rates.

GlobeSt.com: What else should our readers take away from your Nowcast?

Muoio: The big takeaway from this report is that most property segments continue to see healthy valuation growth despite this one-month blip, but we may be getting a signal of a possible shift taking place. The exception, of course, remains the hotel sector, which continues to struggle with supply additions and constrained fundamentals and, as a result, persistent Nowcast weakness.

IRVINE, CA—We don't want to jump the gun and read too much into Ten-X's most recent Nowcast report, which shows that pricing has contracted in a few key sectors, the firm's chief economist Peter Muoio tells GlobeSt.com. Only apartment valuations have seen positive growth over the past month, according to the report. January marked the first time since February of last year that valuations remained flat industrywide on a month-over-month basis, with pricing in three of the five major property types eroding from the previous month. GlobeSt.com spoke with Muoio about what the takeaways should be from the report.

GlobeSt.com: What does this pricing contraction indicate for the future of these sectors?

Muoio: Given that this was just one “off” month for most of these sectors, we don't want to jump the gun and read too much into what this month's performance means for the long term. But, on the other hand, with the long nature of this economic cycle and the seeming paradigm shift in interest rates over the last few months, we may be getting to a stage in the cycle where price appreciation will be a bit more inconsistent as the large valuation run-up in prior years is now limiting prospects for future returns.

GlobeSt.com: How long can the apartment sector remain in valuation growth mode?

Muoio: The apartment sector continues to see robust fundamentals fueling valuations gains in most metros, but the story is starting to waver market by market. While, on a national level, it is very possible that apartment valuations will continue to expand throughout the year, in markets such as New York City, San Francisco and others seeing high supply additions, valuations may prove fickler.

GlobeSt.com: Which factors might slow down or reverse the contraction?

Muoio: First, it is important to note that this was just one month of contraction, so we don't want to read too much into it, since pricing in all sectors except hotel remains solidly higher than a year ago. However, the Nowcast is designed to capture shifts as they are occurring—so the fact that we saw weakness across segments and regions is a yellow flag of which investors should take note. This is particularly true when you consider the timing of this contraction, which has come amid both the rise in interest rates and uncertainty regarding many policies under the new federal administration. In terms of what could improve the environment for CRE pricing, it really comes down to an acceleration in economic growth or some give-back from the recent rise in interest rates.

GlobeSt.com: What else should our readers take away from your Nowcast?

Muoio: The big takeaway from this report is that most property segments continue to see healthy valuation growth despite this one-month blip, but we may be getting a signal of a possible shift taking place. The exception, of course, remains the hotel sector, which continues to struggle with supply additions and constrained fundamentals and, as a result, persistent Nowcast weakness.