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CALCAP Connections                             June 2018

Dangerous Curve Ahead?
Since late 2013, the U.S. yield curve has continued to flatten, meaning shorter term yields are getting closer to longer term yields. It typically slopes upward, as investors demand a premium for risk taken over a longer time horizon. The difference in yields, of around 32 basis points, is the narrowest spread seen since before the Great Recession. The curve is steadily moving towards inversion, where the 2-year yield actually exceeds the 10-year yield. This has many economists worried, as an inverted curve has preceded the past seven recessions. 
With the Fed continuing to push short term rates to control "inflation", a flattening curve signals concern that the Federal Reserve may be hitting the brakes too hard on the economy. Stocks have tumbled in recent days as spreads have narrowed and amid fears of looming trade wars. A flattening yield curve is also bad news for banks, which pay interest on short-term rates and lend at long term rates.
Will the recent tax cuts and government spending be powerful enough to offset the Fed tightening? According to BMO Investment Strategy Group, it's taken 15 months on average for a recession to follow an inversion, with bear markets arriving 17 months after the event. So, while a flattening, or even inverted curve can be a leading indicator, it can take some time before the economy and stock market feel the consequences. We'll be watching closely.
Edward M. Aloe     
President and CEO 
Latest Headlines...
U.S. Home Prices at Least Affordable Level Since Q3 2008
ATTOM Data Solutions, curator of the nation's premier property database, today released its Q2 2018 U.S. Home Affordability Report, which shows that the U.S. home prices in the second quarter were at the least affordable level since Q3 2008.
The report calculates an affordability index based on percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average.  
View Article Here  
California's emigrants aren't all moving to cheaper housing markets 
High housing costs have fueled an exodus from California in recent years - and many of those migrants are choosing to leave the Golden State to put down new roots in Sin City.
Las Vegas ranked as the most popular destination for people moving from cities along California's coast to non-California metropolitan areas, according to a recent report from the real-estate website Trulia. In total, more than 8% of people who moved out of California in the first quarter of 2017 chose Nevada's most populous city as their new home.

Yardi: Strong fundamentals will make multifamily weather headwinds

Despite the rapidly aging cycle, demographic factors and growth in the well-balanced Southern and Western U.S. metros will maintain moderate rent growth resulting in a nationwide rent growth of 2.9%, just under the historical average.
Supply is settling into a steady pace (350,000 to 400,000 units are slated to deliver by year's end, according to National Multifamily Housing Council), and 625,000 units are under construction now. Yardi predicts that only 290,000 units will deliver this year, which represents a 2.2% increase in total apartment stock.
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.

The Sanborn House
65 N. Catalina Avenue   
Pasadena, CA 91106
Edward M. Aloe, President & CEO
(626) 229-9057

Mark A. Mozilo, Principal
(626) 229-9056

12626 High Bluff Drive, Suite 360
San Diego, CA 92130 
Patrick A. Wakeman, Principal
(858) 764-4890

4747 North 7th Street Suite 170
Phoenix, AZ 85014
Drew Buccino, COO
(602) 419-3381

1309 State Street Suite A
Santa Barbara, CA 93101
Greg Blix
Director of Investor Relations
(805) 896-8500

2603 Main Street, Suite 850
Irvine, CA 92614
Len Israel

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