{"id":3382,"date":"2022-10-31T03:49:51","date_gmt":"2022-10-31T03:49:51","guid":{"rendered":"https:\/\/www.coastalcapital.com\/?p=3382"},"modified":"2022-10-31T03:54:00","modified_gmt":"2022-10-31T03:54:00","slug":"october-latest-updates-insights","status":"publish","type":"post","link":"https:\/\/www.coastalcapital.com\/october-latest-updates-insights\/","title":{"rendered":"October Latest Updates & Insights."},"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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As predicted conventional mortgages continue their march up higher! In late October the average 30-year fixed mortgage rate topped 7.3% a jump from just over 7% at the beginning of the month according to Bankrate.com. Much of the increase is being driven by the Fed\u2019s stoppage of purchasing mortgage securities which artificially suppressed mortgage rates over the past few years. We fully expect rates to continue their slow but steady climb in the short- and mid-term as the Federal Reserve continues to raise rates. The stock market also continues to be in turmoil with a general consensus that the bull market is done and we are headed into a mild recession. The smart money is all rushing towards solid assets such as real estate, real estate funds, precious metals, blue chip crypto currencies & solid, bellwether stocks.

Good quality commercial, industrial and multi-family units are still in demand. Many of these buyers have locked in mortgage pool rates previously or have cash to pounce. We do eventually expect a minor pullback in these segments as rates increase. A and B rated proprieties with low CAP rates on commercial yields are now close to treasury rates which might result in lower purchase demand that is not 1031 exchange driven, now that there is an alternative. The rate increase has left many buyers in the single-family residential market paralyzed. First time home buyers are concerned that they are buying the top of the market and by waiting a few months they can get a deal. Current homeowners, most of whom locked in low rates, are experiencing payment shock when exposed to current rates as compared to their existing sub-4% rates. Rates have more than doubled from last year this time adding more than $1,000 to the monthly payment for a median-priced home in Southern California. What this has done is greatly suppress the number of transactions done in the SFR market. September 2022 sales were down roughly 25% as compared to a year ago, especially on the lower end of the market where buyers are more payment sensitive. On the high $1M price range the volume of sale drop has been much more subdued coming in at just 9% lower as compared to September 2021.

The California Association of Realtors just released their 2023 California Housing Market Forecast earlier this month. We are happy to report that their prediction is right in line with our Insights newsletter predictions this year.<\/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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Highlights of the forecast are as follows:<\/p>

  1. Existing, SFR sales forecast is 333,450 homes in 2023, a decline of 7.2 percent from 2022\u2019s projected pace of 359,220.<\/li>
  2. Median home price forecast is to decline 8.8 percent to $758,600 in 2023, from $831,460 in 2022.<\/li>
  3. Even with a dip in prices the affordability index is expected to drop to 18% in 2023 from 19% in 2022.\u00a0<\/li><\/ol><\/div><\/td><\/tr><\/tbody><\/table><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Even though prices will dip some the average interest rate will push up payments as compared to 2022. This will continue to make housing affordability out of reach for money continuing to put pressure on rental rates. We think the President of the Association’s quote sums it up pretty well:<\/span>

    \u201cAs sellers adjust their expectations, well-priced homes are still selling quickly. And for buyers: more homes for sale, less competition, and fewer homes selling above asking price, all point to a more favorable market environment for those who were outbid or sat out during the past two years when the market was fiercely competitive.\u201d<\/span>

    For the Fund we continue to see record application flow coming across our origination desk. Demand for our trust deeds continues strong from our two main borrower segments. Big banks have drastically cut back on lending to their small business clientele. We continually hear stories of solid business owners who have had their banking relationship with their bank for decades getting denied credit. These borrowers still need access to cash to run their businesses and turn to private lenders such as us to unlock equity in their properties. Real estate investors are continuing to acquire multifamily assets and reposition them to extract the most economic value; but liquidity is needed for these capital expenditures and the Fund is often a preferred financing source. With an increase in conventional mortgage rates, we are seeing price inelasticity in rates, meaning almost no borrower push back. In addition, our position in 1st position trust deeds continue to grow just adding extra layers of security to the Fund\u2019s portfolio. We expect that we may even be able to increase our average rate into the 13% range over the next few months. Thank you to all of our partners in the Fund, many of you continue to divest out of equities and reinvest with Coastal.<\/span><\/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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    All our trust deeds require that the funds be used for a business purpose. This borrower comes back again to upgrade his AirBNB Plus home in Malibu. He needed to get upgrades done asap before the busy, upcoming Holiday rental season! Our access to liquidity allowed the borrower to put in a new outdoor kitchen, upgrades to the backyard pool, spa & casita to enjoy the ocean views and new floors & paint throughout. We can\u2019t wait to see the results of all the upgrades!<\/span>

    The owner needed the funds in a week to get contractors going and we came through! The goal is to increase the daily rental rate by $2,000 or more. Afterwards the broker on the deal told us that he brought the deal to us because he knew that Coastal Capital would fund in a week and once we said Yes there was a high certainty to close.<\/span><\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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