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CALCAP Connections July 2019
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Demography and Multifamily Investing
We are now officially in the longest running economic expansion in U.S. history. We are constantly answering questions about where we currently are in the real estate cycle. While no one knows the answer to that question, we believe that it is still a compelling time to invest in multifamily housing based on demographic trends. At CALCAP, we spend a lot of time analyzing demographics, and its effect on real estate. We are especially bullish on workforce (B/C) multifamily housing for several reasons:
Unprecedented wave of continued rental demand
National apartment occupancy climbed to 95.8% in Q2 19. According to analytics firm RealPage, demand was more than double the new supply coming online during the quarter. The two main drivers of rental demand are aging Baby Boomers, who are downsizing and becoming renters, and the young Millennials finally moving out of their parent's basements and becoming renters for the first time. These are the two largest generations in American history. There are currently about 71 million Millennials (ages 22-37) and approximately 74 million Boomers (ages 55-73).
Expanding household formations
Over the next 10 years, researchers suggest that 25 million new households will be formed, of which approximately 13 million will move into a household abandoned by someone who passes away or moves to an assisted living facility. The net gain of 12.5 million new households represents a staggering 86% increase in the growth seen from 2005-2010! Homeownership is expected to continue to decline to around 60% by 2025, as the senior population passes away (80% own their home), and younger generations are less eager to jump into home ownership. Wounds from the Great Recession continue to dampen the desire to own a home, as well as the recent tax laws that have reduced the benefits of home ownership.
Protection against new supply
CALCAP invests in B/C apartment product that is priced substantially below most new apartment communities. This provides us an "affordability cushion" against new supply, which is highly amenitized and has rents well above where our tenants can typically afford.
Favorable and stable financing
Multi-family is one of the only asset classes with stable and consistent financing provided by the government sponsored enterprises (GSEs). Fannie Mae, Freddie Mac and FHA continue to provide over 50% of all apartment loans at historically low rates.
Edward M. Aloe
President and CEO
626-229-9057
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Check Out CALCAP's new website!
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Only half of Americans can afford an entry-level home
This spells major opportunity for the rental market
"The plunge in mortgage rates has created homeownership possibilities for 2.7 million more households as well as move-up possibilities for current homeowners with enough equity," the analysts wrote. "This will spur home-buying activity this year, possibly averting the decline in volume we have been forecasting."
The report called out California for its abysmal affordability rate, as only 34% of its residents can afford to purchase a home there. San Francisco and San Jose stood out as the least affordable at only 11% and 18%, respectively.
View Article Here
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Apartment demand spikes to 5-year high
Lack of affordable homes has locked an increasing number out of the market
The increase in demand has sent rental prices upward, causing them to rise 3% from the same time last year. Rental price increases varied across cities, with Las Vegas and Phoenix posting the greatest gains at 8.8% and 8.1%, respectively. Of the cities that saw the most leasing activity, the Dallas-Fort Worth area takes the cake, with renters moving into 10,443 units in the second quarter of 2019, RealPage revealed.
View Article Here |
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America's rental market heats up as its housing market takes a breather
Zillow says U.S. rental prices accelerated for the ninth-straight month in June
As of now, the average apartment costs the typical renter $1,483. This translates to a 3% annual increase, as rent is now up in 49 of the nation's top 50 rental markets.
"As much as record numbers of new apartments led many to believe that rental markets might have become over saturated with new supply, the reality is that demographics and general economic health continue to keep the pressure on," Zillow Director of Economic Research Skylar Olsen said.
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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
740 N. 52nd Suite 200
Phoenix,AZ 85008
Drew Buccino, Principal and 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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