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CALCAP Connections June 2019
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The Stock-Bond Disconnect
Negative bond yields across the globe have now surpassed $13 trillion. The collapse in bond yields since spring has been swift and suggests that investors expect a recession on the horizon. Ten-year bond rates have recently fallen to record lows, and Germany and France. In the U.S. the 10 year has now dropped below 2%. The cause of these declines has been hard to quantify, ranging from the aging demographics in Europe that will continue to weaken productivity to tariff threats out of Washington.
In any event, when investors seek safety, they pile into bonds. The Eurozone has seen this play out in a big way as investors flock to ultra-safe German "bunds". Yields fall as prices rise. The yield on the 10-year bund hit a -0.32% last week, its lowest ever. This means that investors are willing to park money in German debt and lose 32bps in 10 years! There are about $1.7 trillion German government debt securities compared to $16 trillion from the U.S. federal government. Over the past several years, the ECB has amassed a huge chunk of German bunds as part of its quantitative easing program (similar to what the U.S. did) sharply reducing supply. French long-term bonds hit 0% for the first time last week.
As real estate investors and "users of debt", this bad news is good news. The average 30-year mortgage rate has fallen to around 3.8% according to Freddie Mac, down from nearly 5% in November. On the multifamily side, CALCAP's borrowing costs are directly tied to the 10-year treasury. We are now able to lock in 10-year debt at sub-4% rates.
Meanwhile, the stock market continues to rally at record levels, and is indicative that investors feel the economic recovery is going to continue. Hints of come rate cuts by the Fed are only fueling this optimism. Stocks are saying everything is fine, and bonds are saying a recession is coming. History has shown that the bond guys are typically the "smartest in the room".
Edward M. Aloe
President and CEO
626-229-9057
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Check Out CALCAP's new website!
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Baby Boomers creating "near-gridlock" by aging in place
Boomers have become "a stick in the spokes" of the housing market, Chicago Tribune says
Baby Boomers, the 75 million Americans born between 1946 and 1964, are clogging up the housing market, according to a Chicago Tribune
story last week.
Instead of moving to retirement communities like many of their parents did when they got older,
Baby Boomers are opting to age
in place. The "near-gridlock" is keeping about 1.6 million houses off the national market, the Tribune story said, citing a Freddie Mac analysis.
View Article Here
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Fast-growing cities see substantial decline in affordable housing
Lack of rental housing to accommodate low-income residents
The fastest-growing cities in the U.S. have seen their stock of affordable housing decline substantially from 2010 to 2017, according to the latest
research from Freddie Mac, highlighting a strong correlation in population growth and affordability loss.
The fastest-growing cities have seen their population explode by more than 15% in recent years, and this influx of residents seems to be chipping away at low-income housing options.
View Article Here |
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RentCafe: The national average rent climbs to $1,442 in May
But rents in 64% of the country's largest cities fall below the average
"Most of the largest renter hubs analyzed are priced under the national average, while 6 of them are priced above $1,442," RentCafé writes. "Renting in the most budget-friendly large renter hub, Indianapolis is now $863 after a $1 m-o-m increase. The second-most affordable renter hub is Columbus ($925), followed by San Antonio ($1,029) and two of the most in-demand cities to rent in: Phoenix, ($1,057) and Las Vegas ($1,066)."
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About CALCAP
California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management I & II, CALCAP Properties, CALCAP Lending, and CALCAP Senior Healthcare I, 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 10 years. The Company's core strategies look to actively create alpha for investors while managing risk. CALCAP currently has over $300mm in Assets Under Management. To learn more visit
www.calcapadvisors.com.
Social Mission
CALCAP has created the CALCAP CARES program 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.
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LOS ANGELES
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
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SAN DIEGO
12626 High Bluff Drive, Suite 360
San Diego, CA 92130
Patrick A. Wakeman, Principal
(858) 764-4890
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PHOENIX
4747 North 7th Street Suite 170
Phoenix, AZ 85014
Drew Buccino, COO
(602) 419-3381
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SANTA BARBARA
1309 State Street Suite A
Santa Barbara, CA 93101
Greg Blix
Director of Investor Relations
(805) 896-8500
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IRVINE
2603 Main Street, Suite 850
Irvine, CA 92614
Len Israel
CEO, CALCAP Lending, LLC
949-439-1044
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