CALCAP Connections                           December  2018

Apartment Rental Demand Continues To Surge
Apartment absorption is at the highest levels in three years, according to the U.S. Census Bureau. Construction of new apartments soared beginning in 2012, following a dearth of building during the Great Recession. Apartment construction reached a 20 year high in 2017, sparking concerns of over-building and warnings that demand would slow as Millennials entered their prime homebuying years. According to John Pawlowski of Green Street Advisors, "the demand has been better than expected. It's been a stickier tenant base and pricing power at that tenant base, again in the face of elevated supply, has simply surprised us."

Rents have also remained strong. In Q4 2018, asking rents rose 4.9% over Q4 2017, according to real estate analytics firm, REIS. The Q4 national vacancy rate remained unchanged at 4.8% over Q3, and up slightly from 4.6% at the end of 2017. The vacancy rate peaked at 8.0% at the end of 2009. REIS also cited that "demand for apartments has been robust throughout 2018".

Rising interest rates and a slowing housing market are also contributing to rental demand. Tight housing supply has pushed housing prices higher over the past several years, which has further weakened buyer affordability. "People underestimate how far away from homeownership a lot of renters across the country, even in luxury apartment buildings, are", said Pawlowski. Recent tax reform that reduces the incentive to buy a home, has also boosted the apartment market.

Construction is expected to remain robust in 2019, before completions drop off in 2020. At CALCAP, we are remaining bullish about rental demand as the wave of aging Baby Boomers and maturing Millennials continues to swell for the foreseeable future. We will continue to monitor new supply however, in markets where we are invested, as real estate still requires a "localized" vantage point.

Finally, click the link below to see CALCAP's re-designed website. 
Happy Holidays!
Edward M. Aloe   
President and CEO   
Check Out CALCAP's new website! 

Latest Headlines...

Renters paid more for housing in 2018 than they ever have before
Renters paid out record $504 billion for housing in 2018.

Thanks to  higher rents  throughout much of the year, U.S. renters paid out more in rent than they ever have before, with a total rent payout equal to the gross domestic product of Belgium.

According to a new report from HotPads, U.S. renters paid a record $504.4 billion in rent in 2018, topping 2017's total by $12.6 billion.
U.S. Home Affordability Drops to Lowest Level in 10 Years

Home Prices Less Affordable Than Historic Averages in 78% of Local Markets.

ATTOM Data Solutions , curator of the nation's premier property database, today released its Q3 2018 U.S. Home Affordability Report, which shows that the U.S. home prices in the third quarter were at the least affordable level since Q3 2008 - a 10-year low.
View Article Here
Millennials will purchase at least 10 million new homes in the next 10 years
According to Census Bureau and First American estimates

According to U.S. Census Bureau and First American  calculations, over the next 10 years, Millennials are expected to purchase at least 10 million new homes. By 2060, it is estimated that the generation will have produced more than 20 million first-time homebuyers.
On the lighter side....

California Capital Real Estate Advisors, Inc. (CALCAP) is a real estate investment and advisory firm.  Partnering with businesses, asset managers, developers and communities we reposition distressed real estate, and provide liquidity, adding value for our stakeholders and the communities we serve.  
We are proud of our ability to identify opportunities and to move quickly in adding value to a diversity of projects. Through our experience, extensive network and creative problem-solving skills we have established a strong record of success.

CALCAP's work includes the acquisition of distressed residential and commercial properties and debt; the repositioning of real estate; asset management; real estate brokerage; consulting; and real estate financing services.

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Edward M. Aloe, President & CEO
(626) 229-9057

Mark A. Mozilo, Principal
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