CALCAP CONNECTIONS

January 2023

Principal's Corner

Record New Multifamily Supply—Still Not Enough


2023 is shaping up to be a very strong year for multifamily deliveries. Last year developers issued the highest level of new multifamily permits since 1985 at an annual pace of about 635,000 units. Yardi Matrix forecasts that 440,000 units will be delivered this year, compared to 325,000 units in 2022. Deliveries are concentrated in mostly fast- growing sunbelt markets with Dallas, Austin, Miami, Houston, and Phoenix leading the charge.

 

There have been approximately 2 million new units delivered since 2018. New starts are diminishing, however, due to current market conditions. Costs of materials and labor continue to increase along with insurance costs. Construction debt rates have also doubled, making projects much harder to underwrite. Many large commercial banks have cut back on construction loans in anticipation of weaker demand and pressure from regulators. According to the National Apartment Association and National Multifamily Housing Council, regulatory and other delays have added an astounding 40% to the cost of a multifamily development! Despite this record new supply, many markets are still in desperate need of affordable rental housing. The national housing shortage is still estimated at more than 2 million units. 

Edward M. Aloe
Founder and CEO
626-229-9057

Take a listen to Episode 5 of The Real Estate Wealth Podcast


That’s a wrap! We are excited to celebrate the completion of Season 1 of The Real Estate Wealth Podcast by remembering our first episode and how we got here!

Listen on our site, Spotify, Apple Podcasts, or find us on your favorite streaming service. Follow us here as we recap the season and look ahead to what's next.



Latest Headlines...

How the housing market will evolve in 2023


A subdued year for housing


After two years of runaway home prices, the Federal Reserve stepped in to reverse engineer rampant inflation, and it has been utilizing the housing market as one of the main economic engines to achieve its objective. They increased the Federal Funds Rate from nearly 0% at the start of 2022 to 4.5% in December 2022, its highest level since 2007 and its fastest rise in more than 40 years.


Long-term mortgage rates responded by rising from 3.25% in early 2022 to over 7.25% in October 2022, more than doubling. They eased below 6.5% recently as core inflation numbers improved for the third consecutive month. The Consumer Price Index core inflation, less the volatility of food and energy, is currently at 5.7%, after peaking at 6.7% in September 2022. The Fed’s core inflation goal is 2%, so they still have a long way to go. The overall U.S. economy has remained resilient, backed by a very strong labor market, sky-high job openings and low unemployment.


View Article Here

Experts Predict What The Housing Market Will Look Like In 2023


Multifamily remains the most sought-after class in commercial real estate.


Nearly one-third, 29%, of investors reported that they will target opportunistic and distressed assets this year compared with 19% in 2022. The Sun Belt and high-performing secondary markets also will remain hot for investments. Dallas leads the list of target markets, followed by Austin, Texas; Miami; Los Angeles; and Nashville, Tennessee. Atlanta; Charlotte, North Carolina; Phoenix; Boston; and Raleigh-Durham, North Carolina, round out the top 10.


Out of the asset types, multifamily, particularly traditional apartment complexes, remains the most sought-after sector at 38%, followed by industrial, 28%, led by modern logistics facilities in major markets.


“While weakening macroeconomic conditions and rising interest rates will weigh on commercial real estate investment volumes in 2023, the amount of capital targeting the sector remains abundant,” said Chris Ludeman, global president of capital markets for CBRE. “Investors are willing to accept more risk and achieve higher returns and other metrics such as lower leverage, increased debt-service-coverage ratio, and once again a focus on acquiring assets at a discount to replacement cost have all been pushed to the forefront.”


View Article Here

Rents Continue to Fall at Year-End


Average U.S. asking rates decreased $4 to $1,715.


After historic highs in 2022, multifamily rents ended the year with a drop, according to the latest Yardi Matrix Multifamily Report. U.S. asking rents saw a $4 decrease last month to $1,715, while growth decreased by 80 basis points year over year to 6.2%, the lowest level since May 2021.


All of Yardi Matrix’s top 30 metros experienced positive rent growth year over year. Indianapolis held the top spot, seeing an 11.4% increase, followed by San Jose, California, with a 9% jump; Kansas City, Missouri, with an 8.3% increase; and Florida’s Miami and Orlando recording 8.1% and 8% bumps, respectively.


Month over month, rents only increased in New York, 0.9%; Indianapolis, 0.2%; and Houston, 0.1%. According to Yardi Matrix, Boston saw the biggest monthly drop at -1.1%, although rents rose 5.7% in the market for the year. Raleigh, North Carolina, and California’s Inland Empire also saw 0.9% month-over-month decreases in December.


View Article Here

On the lighter side....
About CALCAP Advisors

About CALCAP

California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management, CALCAP Properties, CALCAP Lending, CALCAP Senior Healthcare, and CALCAP Strategic Opportunities, collectively known as “CALCAP”), is a California-based investment company founded in 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 14 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $650mm in Assets Under Management. To learn more visit www.calcap.com.


Social Mission

CALCAP CARES is a 501(c)(3) private foundation organized 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 gives employees the opportunity to donate unused vacation and sick days for a very worthy cause.

LOS ANGELES

The Sanborn House

65 N. Catalina Avenue   

Pasadena, CA 91106


SAN DIEGO 

12626 High Bluff Drive, Suite 360

San Diego, CA 92130 


PHOENIX

740 N. 52nd Street

Phoenix, AZ 85008 


SANTA BARBARA

1309 State Street, Suite A

Santa Barbara, CA 93101




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


Patrick A. Wakeman, Principal
(858) 764-4890

Drew Buccino, Principal and COO
(602) 419-3381

Greg Blix,Dir. of Investor Relations
(805) 896-8500

Tim Landwehr
Executive VP, CALCAP Lending, LLC
747-268-0675
Mark A. Mozilo, Principal
(626) 229-9056

View our website: www.calcap.com

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