Your March Newsletter from CALCAP!

CALCAP CONNECTIONS

March 2022

Principal's Corner

Homeownership Affordability Continues to Get Squeezed

Mortgage rates continue to soar and jumped to their highest levels in more than three years last week, in anticipation of continued monetary policy restrictions from the Federal Reserve. Earlier this month the Fed raised its short-term borrowing rate by 0.25%, the first increase since 2018. Fed Chair Jerome Powell has indicated that the Fed will increase rates further and faster, in an attempt to restrain growth in a surging inflationary environment.

According to the MBA, mortgage applications to refinance dropped 15% last week and are now down 60% from a year ago. The average interest rate for a 30-years fixed rate conventional mortgage (loan balances of $647,000 or less) increased to 4.80%, up from 4.50% one week ago and 3.18% on year ago.

This comes as buyer demand continues to remain strong. According to the lates S&P Case-Shiller Index, home prices in 20 major cities rose 19% in January from a year ago. The combination of rising interest rates and rising prices is weakening affordability dramatically and pushing homeownership beyond the means of many middle-class Americans. According to a Bankrate survey released this week, more than 40% of respondents said they do not earn enough to buy a house of afford a down payment.

These factors continue to put upward pressure on rents as would be homebuyers continue to get priced out of the market.

Edward M. Aloe

Founder and CEO

626-229-9057

Latest Headlines...

February Sees More Multifamily Rent Gains

Yardi Matrix: The average U.S. asking rent rose $10 to a new record of $1,628.

Of the top 30 metros tracked by Yardi Matrix, 90% saw double-digit, year-over-year rent jumps. Miami tops the list, with a 27% increase in year-over-year rents through February, followed by Tampa and Orlando, Florida; Phoenix; and Las Vegas. Outlier markets also showed significant growth, with San Francisco seeing a 9% increase and Kansas City, Missouri, experiencing an 8.1% bump.

According to Yardi Matrix, the demand that created last year’s rent growth has not been satisfied, with national occupancy rates up 120 basis points year over year. In January 2021, occupancy rates were 95% or higher in only 13 of Yardi Matrix’s top 30 markets; however, one year later, only two are below that level. Occupancy growth is strong in the Sun Belt markets in Florida and Texas, but also in gateway markets that lost renters during the pandemic.

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

Homebuyers are really beginning to feel the squeeze

Median mortgage application monthly payment climbed to $1,653 in February

The one-two punch of higher mortgage rates and escalating home prices reduced homebuyers’ ability to buy homes in February. The trend is also likely to worsen in the coming months.

The national median monthly mortgage payment settled in loan applications increased 8.3%, from $1,526 in January to $1,653 in February, according to a survey published Thursday by the Mortgage Bankers Association. Compared to February 2021, payments jumped 25.6%.

Conventional loans’ national median mortgage payment went from $1,582 in January to $1,749 in February. Meanwhile, FHA loans increased from $1,142 to $1,201 in the same period.

“Low unemployment has spurred strong income growth in early 2022, but homebuyer affordability has decreased due to the quick rise in mortgage rates amidst steep home-price growth,” said Edward Seiler, MBA’s associate vice president for housing economics and executive director at the Research Institute for Housing America, in a statement.

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 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 will allow employees the ability to donate unused vacation and sick days for a very worthy cause.