Your January Newsletter from CALCAP!

CALCAP CONNECTIONS

January 2022

Principal's Corner

Apartment Demand At All Time Highs

At the end of 2021, the national apartment market was above 97.5% occupied—the highest level ever recorded, according to RealPage analytics. RealPage has been tracking this data since 1993. Occupancy levels were above 96% in 148 of the 150 markets the firm tracks. Traditionally, occupancy of 95-96% is considered “full,” when taking into account the time needed to turn units between leases.

The occupancy rate rose 2% from December 2020, which was a very tight rental market as eviction bans remained in place nationwide. Asking rents rose 12% in 2021, according to the research firm Reis. In the sunbelt markets where CALCAP primarily invests, some landlords reported “lease trade-out” rent growth—the growth that occurs when a tenant vacates a unit and is replaced—ranging from 25-39%! In the CALCAP portfolio, we achieved average asking rent growth of 15.1% last year and “lease trade-out” growth of 19.3%. Renewals remained very high as more tenants decided to stay put rather than face higher rent increases by moving. The lingering effects of Covid was also a factor in high tenant retention. Our renewals averaged 74.3% in 2021, well above our operating goal of 65%.

On the supply side, new multifamily units continue to hit the market is large volumes. Nearly 360,000 market rate units were completed last year. That marks the largest addition to supply in 30 years. Another 682,000 units are currently under construction. Of these, approximately 426,000 units are anticipated to be delivered in 2022. This would be the first time since 1987 where supply has exceeded 400,000 new units. While this may be encouraging news for renters, the reality is that the great majority of the supply will be in Class A/A+ communities, doing little to solve for affordability. At CALCAP, we invest in workforce housing B/C communities for exactly this reason. While new supply is always a risk for landlords, the rent delta between the new supply and our workforce product is typically too great from a tenant affordability standpoint.

Edward M. Aloe

Founder and CEO

626-229-9057

Latest Headlines...

U.S. housing market starts 2022 with record low inventory

Number of active listings falls below 500,000

“We’re kicking off yet another year with a whole lot of buyers whose home search has been ongoing for months, and they are as eager as ever,” Redfin Chief Economist Daryl Fairweather said in a statement. “This month, the stage will be set for the 2022 housing market, and we’ll be closely watching whether prices climb like they usually do in January or whether they start off high and stagnate due to rising mortgage rates.”

During this time period, the median home sales price rose 14% year over year to $358,460 and the median asking price of a newly listed home increased 12% to $341,200. The percentage of homes that sold above also increased from a year prior — to 41% from 33%. However, the percentage of homes seeing price decreases also increased. On average, 2.4% of listings for sale each week during this time period had a price drop. Overall, the average sale-to-list price ratio was 100.3%.

Another result of the low inventory/high demand conditions is the decrease in the median number of days a home that sold sat on the market. A year ago, this number was at 34 days, but during the four-week period ending Jan. 2, it was 27 days. Of the homes that sold during this time period, 40% had an accepted offer within their first two weeks on the market.

View Article Here

Home affordability plummeted in fourth quarter

77% of counties are now labeled less affordable by ATTOM Data Solutions

ATTOM found that ownership costs have risen in the fourth quarter of 2021, with the typical home consuming 25.2% of the average national wage of $65,546. In comparison, the fourth quarter of 2020 saw ownership costs at 21.5%.

However, ATTOM noted that the latest level is still within the 28% standard lenders prefer for how much homeowners should spend on mortgage payments, home insurance and property taxes.

The report added that house hunters unscathed financially by the pandemic have buoyed housing costs, as they “surged into the market amid a combination of mortgage rates hovering around 3 percent and a desire to trade congested virus-prone areas for the perceived safety of a house and yard, as well as the space for growing work-at-home lifestyles.”

View Article Here

Phoenix Multifamily Market Sizzles

Strong job and population growth continues to heat up the metro.

Phoenix continues to see year-over-year double-digit rent growth, up 25.9% in November over the same period in 2020, according to Yardi Matrix. The market’s net absorption also has reached record highs and outpaced supply, with occupancy rates over 96% in the fourth quarter.

“Rent growth is still not making it an unaffordable market,” says Zonda managing principal Kimberly Byrum. “It’s strong, but it’s not Seattle and Los Angeles rent numbers. It’s much more affordable than the coastal markets.”

The sprawling metro, which spans 80 miles from east to west, also boasts a business-friendly climate and land availability—good news for the multifamily industry. Taiwan Semiconductor Manufacturing Co. has started construction on its multibillion dollar chip plant, with plans to build several more factories over the next three years. KORE Power has plans for a 1 million-square-foot battery manufacturing facility, slated to be completed in 2023 and create more than 3,000 jobs.

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 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 12 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $400mm 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 will allow employees the ability to donate unused vacation and sick days for a very worthy cause.