CALCAP Connections                           January  2019

Economic Outlook
On the economic front, employment gains topped 312,000 in December, and unemployment is at a 50-year low of 3.9%. Corporate America is hiring and making money. Wage growth is also seeing upward momentum. In response, one question remains, what will the Fed do with interest rates? The Fed tightening cycle began in late 2015, and although they have been transparent in their rate moves to help calm the markets, no one knows for sure. Thus far, the equity markets have been wildly volatile in response to the Fed hikes coupled with our ongoing trade war with China. At the same time, the 10- year treasury yields have come down, resulting in a flattening of the yield curve (the difference between 2-year and 10-year treasury spreads). Fixed term borrowing costs for commercial real estate investors are based off the 10-year treasury rates--which is keeping rates low on apartment loans and fueling continued demand.
President Trump just announced a "short-term" re-opening of the government, putting a temporary halt to the longest government shutdown in history. Only time will tell whether this is a temporary fix or a resolution that can be reached. Rating agency Standard and Poor's estimates that the U.S. economy loses more than $1.2 billion for every week the government is closed.
Happy New Year!
Edward M. Aloe  
President and CEO  
Check Out CALCAP's new website! 

Latest Headlines...

Redfin: Middle class buyers are being priced out of housing market
Share of affordable homes fell in 49 metros from 2017 to 2018

"Homeownership is increasingly out of reach for the typical American," Redfin Chief Economist Daryl Fairweather said. "Over the last few years builders have focused on luxury homes, and there hasn't been enough construction of affordable starter homes." 
Redfin calculated housing market data ranging from 2017 to 2018, focusing on the share of affordable active listings that were available to households making the median income across 49 metro areas.  
View Article Here  
Yardi: National Rent and YOY Growth Remain Flat
Las Vegas and Phoenix lead the nation in rent growth, as market fundamentals remain stable overall.

2018 marks the multifamily sector's eighth-straight year of strong performance. Rents have increased by 31% at the national level since January 2011, and annual rent growth has been at least 2.9% in each of the past eight years except 2017. While rent growth has remained flat since the summer, the year's final rate of 3.2% slightly exceeded Yardi's expectations.
View Article Here
5 Investment Trends to Watch in 2019
Continued job growth, household formation, affordability may be key for multifamily investments in the new year.

From an apartment fundamental standpoint, higher interest rates create positive tailwinds because the cost to finance a home purchase increases as renters weigh whether to buy or rent. All that said, rising interest rates may not be the most significant risk for apartment owners in the new year. According to a recent report from Pew Charitable Trusts , since 2001, we've seen a 51% increase in rent and a widening gap between income and rent growth. The main exposure affecting today's investors will likely center around affordability for consumers rather than interest rates.  
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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