July 6, 2022

Sacramento, CA Real Estate Market Trends & Analysis [Updated 2020]

Jump To Another Year In The Sacramento Real Estate Market:

  • 2020 Sacramento Real Estate

  • 2016 Sacramento Real Estate

  • 2015 Sacramento Real Estate

The Sacramento real estate market owes a great deal of its recent success to its neighbors. The success seen in San Francisco and San Jose has translated to Sacramento. As a result, real estate in Sacramento has increased in value without sacrificing demand. The Sacramento housing market saw an influx of interest, as the California capital is more affordable than its nearby counterparts. The unique combination of demand and increases in local home values should serve Sacramento real estate investors well.

Sacramento Real Estate Market 2020 Overview

  • Median Home Value: $366,600

  • 1-Year Appreciation Rate: +7.7%

  • Median Home Value (1-Year Forecast): 5.3%

  • Average Days On Market (Sacramento Association of Realtors): 21

  • Median Rent Price: $1,795

  • Price-To-Rent Ratio: 17.01

  • Unemployment Rate: 9.4% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 1,552,058 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $63,902 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 8.93%

  • Foreclosure Rate: 1 in every 6,397 (1.5%)

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Sacramento Real Estate Market Forecast 2021

As the capital of California, one of the hottest statewide markets in the country, Sacramento has received some significant tailwinds. Despite the pandemic, in fact, the Sacrament real estate market appears to be thriving. Most notably, Sacramento’s latest success appears to be due to its proximity to several other thriving cities. As the cheaper alternative to its exorbitantly expensive neighbors to the south (San Francisco and San Jose), Sacramento has received some added attention. For what it’s worth, nearly a decade’s worth of appreciation has culminated in an exodus from larger cities to smaller cities like Sacramento.

The added attention comes at a time when more and more people are working from home. At the very least fewer people need to live close to an office, which gives them the freedom to look at cheaper alternatives like Sacramento. When all is said and done, it’s fair to say Sacramento will receive a lot of extra attention in 2021. The demand will most likely continue to drive prices even higher, at least until more inventory can be brought to the market. In the meantime, prices will increase in line with supply and demand.

Inventory constraints will spill over into the rental market, too. With a price-to-rent ratio over 17, it’s usually more affordable to rent a home in Sacramento, which means the rental market is already frothy. However, the lack of listings has prevented would-be buyers from participating in the market. Ultimately. those who aren’t able to find a home to buy will be relegated to the pool of renters, which seems to be increasing by the day. As a result, next year should see a large increase in rental demand.

2020 Sacramento Real Estate Investing

The Sacramento housing market’s greatest thing is its proximity to San Jose and San Francisco. As the more affordable alternative, the state’s capital has seen an increase in buyers. As buyers flee the likes of San Francisco and San Jose, the city has become a safe haven for those with a more modest budget.

It is most likely the short distance between these two cities which helped land California’s capital on Realtor.com’s latest Hottest Markets list. As recently as last year, the Sacramento real estate market was considered the country’s nineteenth hottest market.

While real estate in Sacramento is more affordable than its neighbors, prices are well above the national average. So much so, in fact, that rehabbers are finding attractive profit margins harder to come by. Prices are higher than ever, which begs the question: Will house prices go down in Sacramento?

Home values most likely won’t drop anytime soon in the Sacramento housing market. All of the attention the state’s capital is gaining is simultaneously driving up demand and competition. The added attention has enabled homeowners to increase asking prices for the better part of a decade. Now that the pandemic has cut into the local inventory supply, prices should rise for the foreseeable future. There aren’t enough homes to meet the demand created in the wake of today’s historically low inventory rates. All things considered, it’s safe to assume home values in Sacramento will continue rising for the foreseeable future.

That’s not to say rehabbing isn’t still considered a viable exit strategy in Sacramento, but rather that today’s investors are seeking refuge in long-term rental properties. Not only may rental properties help offset today’s higher prices with years of cash flow, but it has never been cheaper to borrow money from traditional lenders. As recently as September, the average commitment rate on a 30-year-fixed-rate mortgage was 2.89%, according to Freddie Mac. At this time last year, rates were around 3.61%, which marks a dramatic improvement for anyone looking to buy. The difference will save today’s buyers thousands of dollars during the average loan’s life, which makes long-term rental properties all the more attractive.

The Sacramento housing market is expected to see an influx of buyers and renters from people fleeing other cities. With more people working from home during the pandemic, the need to live close to an office has been all but eliminated. People have the option to trade their cramped living spaces for spacious accommodations in Sacramento. The exodus from nearby cities will almost certainly drive up rental demand and reduce the risk of vacancies.

2020 Foreclosure Statistics In Sacramento

The number of new foreclosure filings in the Sacramento real estate market has maintained a steady downward trend since the last recession caused numbers to spike. However, the Coronavirus has caused a reversal in trends. For the first time in a while, Sacramento actually saw month-over-month increases in filings. As recently as March, “the number of properties that received a foreclosure filing in Sacramento, CA was 6% higher than the previous month and 75% lower than the same time last year,” according to RealtyTrac.

In the meantime, government assistance programs are expected to keep delinquent homeowners in their homes. However, mortgage obligations will need to be made current sooner or later. When banks collect, those who aren’t able to keep up with payments may file for foreclosure. There’s a chance the Sacramento real estate market will see more filings when all of the dust settles.

Of the currently distressed homes in the Sacramento housing market, bank-owned homes saw the biggest month-over-month increase. Jumping 50.0% from July to August, bank-owned homes now represent 16.2% of the city’s distressed inventory. The largest portion of distressed homes in Sacramento hasn’t even been foreclosed on. Instead, they are at risk of foreclosure. Otherwise known as pre-foreclosures, 54.1% of the distressed properties identified by RealtyTrac are simply at risk of falling into foreclosure. Despite their ambiguous status, pre-foreclosures represent a great opportunity for Sacramento real estate investors, which begs the question: Where should I invest in Sacramento?

Here’s a list of the neighborhoods with the highest distribution of distressed properties in Sacramento:

  • 95832: 1 in every 1,626 homes is currently distressed

  • 95811: 1 in every 3,578 homes is currently distressed

  • 95822: 1 in every 4,253 homes is currently distressed

  • 95820: 1 in every 4,493 homes is currently distressed

  • 95824: 1 in every 4,895 homes is currently distressed

Is Sacramento a good place to invest? Sacramento appears to be a great place to invest at the moment. Not only are investors awarded an increases in foreclosures which may be had at a discount, but demand looks as if it will increase exponentially. The Sacramento real estate market will almost assuredly be the primary beneficiary of people leaving San Jose and San Francisco during the pandemic. Therefore, those in the Sacramento real estate investing community who position themselves well now may be able to capitalize on the influx of demand.

2020 Median Home Prices In Sacramento

With a median home value of $366,600, the average price of real estate in Sacramento is about $109,937 more than the national average. It is worth noting, however, that while real estate in Sacramento is more expensive than the majority of the country, it’s considerably cheaper than some of its closest neighbors: San Francisco and San Jose to be exact. In fact, the city boasts a median home value that is merely a fraction of San Francisco ($1,416,879) and San Jose ($1,052,521). Nonetheless, it’s the capital’s close proximity to these cities that has facilitated the latest increase in prices.

According to NeighborhoodScout, the following neighborhoods in Sacramento are responsible for the city’s largest appreciation rates over the last 20 years:

  • City Center

  • Stockton Blvd / 22nd Ave

  • 14th Ave / Martin Luther King Jr Blvd

  • L St / 7th St

  • Power Line Rd / W Elkhorn Blvd

  • 14th Ave / Stockton Blvd

  • E St / 16th St

  • Y St / Broadway

  • Oak Park

  • P St / 16th St

While house prices go down in Sacramento? While it’s too soon to tell the latest impact the Coronavirus will have on the economy, most experts expect prices to increase over the next 12 months. While price increases halted temporarily in response to the pandemic, historically low interest rates combined with low inventory saw demand drive prices up. If anything, the pandemic has served to increase prices more than anyone would have expected.

Sacramento Real Estate Market Forecast

Real estate in Sacramento was already firing on all cylinders entering 2020. In January, there was almost no doubt California’s capitol would maintain all of the momentum it had built in the previous years. Well into the fourth quarter, it would appear as if all of the Sacramento real estate trends continued, only faster than many predicted. If for nothing else, Sacramento may have actually benefited from the pandemic.

Local real estate appears to have been more insulated from COVID-19. Not only has the unemployment rate made drastic improvements since the spike in April, but more and more people in Northern California appear to be flocking to Sacramento in an attempt to escape Coronavirus “hot-zones” like San Francisco. Now that people don’t need to live within proximity of their office, San Francisco and San Jose residents appear ready and willing to trade their confined quarters for larger, more affordable homes in Sacramento. As a result, it’s safe to assume Sacramento will see a spike in demand and activity as the pandemic plays out.

The Impact Of COVID-19 On The Sacramento Real Estate Market

The introduction of COVID-19 in the first quarter of 2020 threw a wrench into what could have only been described as a “hot” national real estate market. Since the country put the Great Recession in the rearview mirror, in fact, the majority of markets across the country made impressive gains, and Sacramento was no exception. To that end, the pandemic served as a significant roadblock for what was an otherwise thriving real estate market.

Without warning, any real estate activity stopped in the wake of fear and uncertainty. Almost overnight, bottlenecks occurred at understaffed banks, homeowners took their listings off the market, and prospective buyers refused to enter other people’s houses. The abrupt halt to real estate operations in Sacramento happened almost overnight. Fortunately, the market came roaring back almost as fast as it stagnated, which spells good news for the Sacramento housing market.

The impact of COVID-19 on the Sacramento real estate market has more to do with the newly created indicators than the virus itself. In particular, the Fed dropped interest rates to historically low levels to promote buying activity. With rates under 3.0%, buyers are more inclined to act sooner rather than later, and so far, the thesis is holding true. As it turns out, more people are ready and willing to buy today than even just a few short months ago. Unemployment has improved since it peaked in March, and news of a vaccine has spurred more people to take action. All of this is great news for the Sacramento real estate market, but inventory levels remain a concern.

Supply and demand is still an issue in Sacramento, and the Coronavirus only compounded inventory shortages. As a result, competition will continue to drive up home prices for the foreseeable future. Prices will rise as long as demand outweighs supply, but help is on the horizon. Builders have been able to get back to work and should be able to alleviate some of the stress. New listings are a ways out, but the fact remains: more homes will be brought to market in 2021, which should actually help everyone in the local market.

The Coronavirus certainly threatened the Sacramento real estate market, but the threat was short-lived. Disruption wasn’t as devastating as many thought and may actually serve as a positive catalyst moving forward.

Sacramento Housing Market: 2016 Summary

  • Median Home Price: $323,700

  • 1-Year Appreciation Rate: 11.2%

  • 3-Year Appreciation Rate: 36.6%

  • Unemployment Rate: 5.6%

  • 1-Year Job Growth Rate: 2.8%

  • Population: 479,686

  • Median Household Income: $55,615

Sacramento Real Estate Investing 2016

Business was booming for the Sacramento real estate market in 2016. The first half of the year saw home prices rise to their highest level in nearly nine years, while appreciation rates continued to steamroll past the national average. Furthermore, the Sacramento housing market gained support from home affordability, new housing construction, and the local economy, all of which helped the city evolve to what it is today.

According to Sacramento’s real estate news, the city experienced substantial gains in the first half of the year. The median home price was $323,700 during the second quarter, compared to the national average of $239,167. One-year appreciation rates were 11.2% compared to 4.9% achieved by the rest of the country, while three-year rates skyrocketed to 36.6% compared to 17.8%.

Along with flourishing home prices and appreciation rates, the local economy was strong. As one-year job growth reached 2.8% during the second quarter, employment held up compared to the national average of 1.9%. Although unemployment rates were higher than the rest of the country in the second quarter, the local economy was stronger than in other markets.

Homeowners paid 13.9% of their income to mortgage payments during the second quarter, whereas the national average paid 15.8%. Home affordability for the Sacramento housing market improved in the second quarter of 2016, making it one of the country’s more affordable markets. On that note, new housing construction was on the rise, which could further enhance local affordability.

Sacramento Housing Market: 2015 Summary

  • Median Home Price: $268,700

  • 1-Year Appreciation Rate: 7.3%

  • Unemployment Rate: 6.2%

  • 1-Year Job Growth Rate: 2.0%

  • Population: 479,686

  • Median Household Income: $57,027

Sacramento Real Estate Investing 2015

Prices in the Sacramento real estate market experienced every end of the spectrum from 2008 to 2015. The onset of the recession saw record lows, and recent appreciation rates all but erased the drop in prices. Real estate appreciated by as much as 64.6% in the previous three years. It wasn’t until the end of 2015 that the pace of appreciation started to temper, and even then, it is still higher than the national average.

At $268,700, the median home price was about $60,000 more than the national average at the time. Homes in the Sacramento housing market were appreciating at a rate of more than 64.0%. That is significant, considering it was on the heels of the housing crisis. Homeowners were automatically reintroduced to the equity they thought they had lost.

Sacramento real estate investing saw the number of available foreclosures diminish by 2015. According to RealtyTrac, just under 40.0% of all Sacramento foreclosures were considered to be “pre-foreclosures.” At 39.4%, pre-foreclosures were down from the previous month and nearly 30.0% from the previous year.

Sacramento County Map:

Sacramento Real Estate Market Summary

The recent success of the Sacrament real estate market is due, largely in part, to the unparalleled success of its neighbors. San Jose and San Francisco are too overpriced for many people to call those areas home, which has forced prospective buyers to turn their attention to Sacramento. As a result, real estate investors who can cater to those coming to their city from its more expensive counterparts could be in for a good year. Not only is demand expected to increase, but so too are home values and opportunities.

Have you thought about investing in the Sacramento real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in Sacramento in the comments below.

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