Your October Newsletter from CALCAP!

CALCAP CONNECTIONS

October 2025

Principal's Corner

Q3 Multifamily Market Snapshot

The third quarter of 2025 is continuing to show early signals of stabilization in the multifamily market, albeit with some continued economic uncertainty. While the market continues to realize the full impact of “higher-for-longer” interest rates and elevated operating costs, the broader environment is beginning to feel a bit more encouraging—especially for experienced operators like CALCAP.

Market expectations also seem to be changing. The Fed lowered rates by 25-basis-points this week. Many economists expect another 25-basis-point Fed rate cut by year-end and an additional 75 basis points of rate cuts through 2026. While inflation remains slightly above target, the broader economy is showing signs of cooling. Labor markets have softened slightly, and consumer demand appears to be weakening, prompting the Fed to signal a more dovish posture moving forward. This pivot, if sustained, could offer welcome relief to cap rate pressures and financing costs.

Transaction volume continues to remain light but improving. MSCI data indicates that multifamily prices have likely bottomed after an extended decline, with early signs of price stabilization—and a modest rebound in June and July-- after 29 consecutive months of YOY declines!

Oversupply has been a headline risk throughout the past 18 months, particularly in growth markets where new deliveries temporarily outpaced demand. However, that wave of supply is now rolling off. Construction completions are down sharply—about 45% year-over-year in August—and pipeline reductions are expected to continue through 2027. This correction should alleviate concerns around lease-up competition and concessions---which have negatively affected our occupancy and rents in most markets over the past 2 years.

All things considered, we believe the current environment is ripe for selective opportunity. As the macro headwinds begin to subside and the supply-demand imbalance starts to correct, CALCAP is well positioned to acquire assets on an attractive basis, with improved tax treatment and a clearer path for future rent growth. Our focus remains on downside protection, strong operations, and staying nimble as the next phase of the cycle begins to unfold.

Edward M. Aloe

President and CEO

626-229-9057

Welcome to the Real Estate Wealth Podcast, where we explore real estate as the most proven way to financial freedom. Join us for insights with leading experts and discover how vibrant health and an abundance mindset are keys to true wealth.

The Real Estate Wealth Podcast- YouTube

The Real Estate Wealth Podcast Audio

Latest Headlines...

A Coast-to-Coast Look at 125 Apartment Investment Markets

Outside the highest-profile metros, Sun Belt cities show unmistakable momentum. Dallas places fourth in the rankings with 26,765 tracked units and high investor engagement in affordable and mid-tier apartments, while Miami and Houston build on demographic migration and job growth as top 10 markets.

Phoenix and Chicago—though lower in aggregate value per unit than the coastal giants—demonstrate steady resilience with persistent demand for both Class A and value-add properties. Kansas City, which holds the 31st position, exemplifies the solid performance in the Midwest; deals such as the WaterCrest at City Center (306 units, $44.8 million in financing) provide evidence of high occupancy and well-balanced underwriting that supports local sector stability.

View Article Here

Today’s Renter: Younger, More Diverse and Digitally Savvy

The typical U.S. renter household decision-maker is 41 years old, with half under the age of 40. By generation, Gen Z makes up 44% of recent movers but only 26% of all tenants. Renters are also more racially diverse than the overall adult population, including 49% non-Hispanic white, 19% Hispanic and 19% Black.

Financially, the median renter household earns about $54,000 annually, well below the roughly $80,000 median for all U.S. households. Most tenants are single rather than partnered, a factor that contributes to the lower income profile, Zillow said.

About 56% of renters live in apartment buildings, while 28% occupy single-family detached homes, 8% live in townhouses and 6% in duplex or triplex structures. The median rental home has two bedrooms, one bath and between 1,000 and 1,499 square feet.

View Article Here

Apartment Demand Rises As Mortgage Costs Widen Rent Gap

Avison Young’s third-quarter U.S. multifamily report found that the average monthly mortgage payment is now $825 higher than the average multifamily rent—the widest gap since before 2020. Rising interest rates and modest home price appreciation have widened that spread, keeping multifamily absorption closely aligned with new deliveries. The gap between units delivered and units absorbed has narrowed to its lowest level since 2021.

A sharp decline in new construction is also reshaping the market. Development activity has fallen nearly 50% between 2024 and 2025 as builders pull back amid high financing costs and tighter lending conditions. While projects already underway continue to add inventory, the shrinking pipeline points to a much thinner wave of new supply in 2026 and 2027.

View Article Here

On the Lighter Side...

About CALCAP Advisors

About CALCAP

California Capital Real Estate Advisors, Inc., is a California-based investment company founded in 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 17 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $650mm 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 gives employees the opportunity to donate unused vacation and sick days for a very worthy cause.