Properties represented 5 TICs in multiple 1031 exchanges in the recent purchase
of a 54,750 square foot shopping center, predominantly leased by national credit
tenants, located within the desired Southern California retail market of Hemet. The below replacement cost price of
$8,600,000 equates to an 8.37% cap rate with a 13% leveraged cash on cash
return for a high-performing retail center shadow anchored by Stater Bros
Supermarket (NAP), a regionally dominant grocer, and junior anchored by CVS and
Expect housing in 2019 to be
flat. The recent decline in mortgage rates from 5% to 4% for the 30-year-fixed
provides some support for housing.
However, the tax-law change, which took away many of the tax benefits of
homeownership, weighs on demand. The impact of the new tax law is still
filtering through the housing market, particularly in more expensive markets
like California, and Florida, where those tax benefits are more important.
Affordability remains an issue. The
runup in house prices over the last six years makes housing less affordable for
many entry-level buyers, even with the lower mortgage rates.
A slight increase in new home
construction this year, particularly at lower price points, seems likely. In
terms of price growth for houses, 2019 will likely be weaker than recent years,
probably in the 3% range due to affordability issues and the tax-law change. Government dysfunction, geo-political risks,
possibilities of more government shutdowns relating to immigration and the debt
ceiling, trade wars and resulting stock market declines, further add to the
uncertainty and decreased demand of potential home buyers.