CALCAP CONNECTIONS

August 2022

Principal's Corner

Multifamily Delinquency Rates Remain at Historic Lows

All the talk of the slowing housing market has not yet had any effect on multifamily delinquency rates. Commercial and multifamily delinquencies became elevated with the onset of the pandemic but have since continued to decline. According to the MBA, delinquency rates are at the lower end of their historical range for most capital sources. The MBA quarterly analysis looks at the performance of commercial banks/ thrifts, life insurance companies, Fannie Mae and Freddie Mac, and CMBS loans.

At the end of Q1 (the latest MBA data available), DQ rates for each group were as follows:

Banks and Thrifts (90 or more days DQ): 0.56% down 0.03% from Q4 21
Life Companies (60 or more days DQ): 0.05%, an increase of 0.01% from Q4
Fannie Mae (60 or more days DQ): 0.38%, a decrease of 0.04% from Q4
Freddie Mac (60 or more days DQ): 0.08%, unchanged from the fourth quarter
CMBS: 3.36% (30 or more days DQ or in REO): 3.35% down 0.66% from Q4

After a rare uptick in June 2021, the Trepp Delinquency rate shows a steady decline through July of this year. According to Trepp, DQ rates have declined for 23 of the last 25 months. The Trepp reported CMBS delinquency rate was 3.1% in July, down from the MBA reported 3.36% at the end of Q1.

Edward M. Aloe

Founder and CEO

626-229-9057

Latest Headlines...

Millions of new U.S. apartments will be needed to meet growing rental demand

A rental housing shortage in many major U.S. cities has fueled huge rent increases as apartment vacancies have plunged.

To keep up with demand and tackle the shortages, apartment developers need to build more than 4 million units nationwide over the next 13 years, according to a study by the National Multifamily Housing Council and the National Apartment Association.

Currently the U.S. is short by about 600,000 apartments. The demand is even greater for affordable units.

The number of U.S. apartments priced at less than $1,000 a month fell by 4.7 million units between 2015 and 2020, according to industry analysts.

View Article Here

Single-family rental market shows little sign of cooling

SFR property rents are rising fast, with California and Florida markets leading the charge, new report shows

Monthly rent prices for SFR properties as of the end of the first half of 2022 increased at a double-digit pace year over year, even as new SFR listings jumped by nearly 58% over the same period, the report shows.

As of June 30, the average monthly rent nationally for a SFR property stood at $2,495, up 13.4% year over year, according to HouseCanary’s report. Average monthly SFR listings for the first half of 2022 came in at 43,891, up nearly 58% year over year, while closed monthly listings over the period averaged 5,788, up nearly 11%.

“Despite the year-over-year increase in both listing and closed listings, rising interest rates, combined with a continued pandemic-related material shortages and construction delays, suggest that the shortfall of affordable rentals is unlikely to reverse before the end of 2022,” the HouseCanary report states.

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The new home sales recession continues

Higher rates have created 10.9 months of supply

Over the years, I have tried to emphasize that the housing market in the U.S. can’t have a credit sales boom like we saw from 2002-2005. This means we won’t be working from record-breaking demand of high sales like we did at the peak of 2005. After all, sales levels are already low historically for new homes. Tuesday’s new home sales report shows only 511,000 new homes sold. This is below the recession levels of 2000 and back to 1996 levels.

The builders are in a better position to manage their inventory glut than when they were working from a credit boom in 2005 that took new home sales up to 1.4 million, with a significant overproduction of single-family homes in relationship to the natural demand curve of new home sales.

After the peak in 2005, new home sales fell by 82% from peak to bottom and then had the weakest housing recovery in the next expansion. We had missed sales estimates in 2013, 2014, and 2015. Also, we had a supply spike in 2018, which caused builders to pause construction — and that was with rates only getting toward 5%. Today, rates near 6% are simply too high for the product they sell to the public.

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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 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 14 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $500mm 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.