Your April Newsletter from CALCAP!

CALCAP CONNECTIONS

April 2022

Principal's Corner

Wage Growth vs. Rent Growth

America’s housing market is undersupplied by an estimated 4 million units, according to Freddie Mac. Increased demand for rental apartments along with lagging supply has caused massive rent growth. Affordability is becoming a major concern for renters. In Class B apartments (where CALCAP primarily invests), rent growth last year was 14.9%, three times as high as the 4.7% wage growth, according to RealPage. Even though hourly wages showed strong increases in 2021, most apartment markets became less affordable as rent growth dramatically outpaced wage growth.

Phoenix has experienced the most dramatic loss in renter affordability over the past 5 years. Cumulative wage growth in Phoenix was 15.5%, while rent growth for Class B apartments increased an incredible 68.8% over the same period! Similar large affordability gaps occurred in Tampa (17.4%vs. 56.9%), and Atlanta (13.1% vs. 53.4%). Other markets where rent growth significantly outpaced wage growth were Las Vegas, Charlotte, Salt Lake City, and Raleigh. Conversely, urban markets that were most impacted by COVID-19 (Los Angeles, San Francisco, New York, and San Jose), actually became more affordable during this same time period!

Edward M. Aloe

Founder and CEO

626-229-9057

Latest Headlines...

Fannie Mae: Affordability fears affecting housing inventory

Consumers concerned about buying a new house are less likely to list their current home

“We know from the past that that when mortgage rates move up significantly, rapidly in a short period, that home sales slow,” Palim said. “So you know, people who have a 3% mortgage or a 3.5% rate mortgage. They’ve got to take that into account, right? They’re not going to want to give that mortgage up easily.”

The 2021 survey found that consumers who did express the desire to move were driven by work/personal lifestyle, rent prices going up, and wanting more outdoor space.

Per Fannie Mae’s data, rent prices increased by 10% in 2021 alone and prices are expected to increase by 4% to 5% in 2022. This is pushing renters to consider buying a house, the blog said. And many renters are eyeing rural areas as an oasis for affordable housing options.

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Inflation cuts homebuyer budgets by $40,000

With inflation at 8.5%, the average consumer is spending $511 more per month compared to a year ago

Home buyers looking for a home in 2022 will have to look for properties that are roughly $40,000 cheaper, according to a report released by the National Association of Realtors on Wednesday. According to NAR, rising inflation is to blame for the smaller home buying budgets.

In March, inflation accelerated to 8.5%, the strongest pace of inflation in 40 years. Due to rising prices, the average consumer in spending $511 more per month compared to a year ago. Annually this works out to $6,132.

Energy commodities, such as fuel oil and motor oil (including gas) saw an inflation rate of 48.2% in March, the steepest growth pace of any category, while the price of energy services rose 32%. These dramatic price increases resulted in nearly one third of the additional $511 consumes are spending each month being spend on energy services and commodities.

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Homebuyer affordability gets even tougher

Median mortgage application monthly payment rose 5% to $1,736 in March

The national median monthly mortgage payment settled in loan applications rose 5% to $1,736 in March from $1,653 the previous month, according to a survey published Thursday by the Mortgage Bankers Association.

Conventional loans’ national median mortgage payment jumped 4% to $1,819 last month from $1,750 in February. FHA loans payment also rose 4.4% to $1,819 in March from $1,750 in the previous month.

“The healthy labor market and robust wage gains fueled demand throughout the country in March, but rapid home-price growth and the 42-basis-point surge in mortgage rates last month slowed purchase application activity,” said Edward Seiler, MBA’s associate vice president for housing economics and executive director at the Research Institute for Housing America, in a statement.

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On the lighter side....

About CALCAP Advisors

About CALCAP

California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management, CALCAP Properties, CALCAP Lending, CALCAP Senior Healthcare and CALCAP Strategic Opportunities, collectively known as “CALCAP”), is a California based investment company founded and 2008 and headquartered in Pasadena, California. The Company sponsors alternative real estate investment opportunities focused on demographically driven housing. CALCAP has been able to consistently provide both individual and institutional investors with outstanding returns over the last 14 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $500mm in Assets Under Management. To learn more visit www.calcap.com.

Social Mission

CALCAP CARES is a 501(c)(3) private foundation organized to encourage employees to find a way to give back to the neighborhoods where we invest. CALCAP has created "GiveTime4Autism" as its initial program which will allow employees the ability to donate unused vacation and sick days for a very worthy cause.