{"id":3303,"date":"2022-09-13T18:44:35","date_gmt":"2022-09-13T18:44:35","guid":{"rendered":"https:\/\/www.coastalcapital.com\/?p=3303"},"modified":"2022-09-13T18:57:34","modified_gmt":"2022-09-13T18:57:34","slug":"august-2022-newsletter","status":"publish","type":"post","link":"https:\/\/www.coastalcapital.com\/august-2022-newsletter\/","title":{"rendered":"August 2022 Newsletter"},"content":{"rendered":"\t\t
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COASTAL CAPITAL INSIGHTS<\/span> <\/h1> <\/div>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Each month Coastal Capital strives to bring you the latest updates and insights into the California real estate market for both investors and brokers. We always welcome new investors who enjoy above-average returns that are not correlated to the equity markets. As always, we appreciate both new investor and broker referrals, as the network builds it brings more value to all through diversification.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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MARKET UPDATE<\/span> <\/h1> <\/div>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Since our last newsletter things in the California marketplace have definitely pivoted. The residential market has returned to a more normalized, sustainable trends where buyers and sellers are actually negotiating prices and deal points. Not too many stories of sellers receiving multiple offers and going with the one that is $150,000 over asking. As mortgage rates creep up (which is not necessarily a bad thing) affordability of a monthly housing payment has chopped down the hyper appreciation of homes that California experienced the past 24 months. It appears we are settling into a more traditional housing market for SFRs for the remainder of 2022 and through 2023.<\/p>

Now on the multi-family residential front we continue to see strong demand from virtually every landlord who is scrambling to add to their portfolio of properties. Rents are still on the rise in California as our housing shortage is exasperated by the lack of new homes being built. Half of all landlords raised their rents last year alone by 10% of more! The demand from our landlord clients at this time is unprecedented. This means the Fund is able to cherry pick the best-of-the-best to fund new trust deeds. We expect this trend to continue for the foreseeable future. While the commercial and industrial market for Coastal Capital is not a large portion of our portfolio we are seeing strong deal flow in industrial manufacturing and retail and as expected commercial office space continues to struggle.<\/p>

Now many of you have asked if the real estate bubble has popped? We believe that unfortunately it has not (remember the fund\u2019s returns are historically inverse and our best years were 2009 & 2010) because its completely different this time around. During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. The graph below showcases data on the Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA). The higher the number, the easier it is to get a mortgage.<\/p>

Running up to 2008, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Source: Mortgage Bankers Association<\/p>

Today, things are different, and purchasers face much higher standards from mortgage companies. In our opinion traditional mortgage standards are tightening recently due to increasing economic uncertainty. The second factor is the supply of housing continues to be below three-months in California. The supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.<\/p>

For historical context, there were too many homes for sale during the housing crisis of the 2000s (many of which were short sales and foreclosures), and that caused prices to tumble. Today, supply is growing, but there\u2019s still a shortage of inventory available.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Source: National Association of Realtors<\/p>

As mentioned above, our deal flow is at an all time high. Long term real estate investors continue to make up most of our applications to acquire new properties and remodel existing rental units in their portfolios. Small business owners leveraging their personal properties are also out in droves searching for financing. Big banks are once again leaving even their best small business clients high and dry, just take a look at our Highlighted Portfolio property! With such good deal flow we were created just under 3% return for investors in the second quarter of 2022 and improved July\u2019s returns. As the stock market tanks we are happy as fund managers that most of you have been adding to your investment in Coastal Capital. Especially now we are welcoming new partners to join the fund (minimum initial investment for new investors is $100,000.)<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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PORTFOLIO HIGHLIGHT<\/span> <\/h1> <\/div>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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This month\u2019s highlight was one of the easiest deals to underwrite and close with a 10% loan-to-value ratio. The family needed a quick cash infusion for their business to take advantage of some steep discounts being offered by their suppliers if they pre-paid for inventory. Now we are not the least expensive source for accessing home equity however we are known in our broker network for moving fast & actually closing! We love working with clients and their brokers who are on it and respond quickly to get a deal done.<\/p>

Three days later we were able to wire funds so this family business could purchase the inventory to drastically increase their future bottom-line revenue. Our borrower was ecstatic on the speed of the closing. After their busy holiday season, they expect to pay us off early. Think we have a client who will return next year, and the next year, and\u2026<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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