Northeast of San Francisco, where the Sacramento and American Rivers meet, sits the city of Sacramento, California. With a population of over 525,000, Sacramento is the sixth-largest city in the state and the ninth-largest in the United States. The city is well known for its contemporary and constantly evolving culture, and is sometimes referred to as California’s most “hipster city”. It has also been named “America’s Most Diverse City” by Time magazine. As such, it is a popular tourist destination with a plethora of cultural attractions, including the Crocker Art Museum, the oldest public art museum in the Western United States, as well as the California Museum, California Hall of Fame, Old Sacramento State Historic Park, and more.
Sacramento has been and continues to be the fastest growing city in California. This year, the median value of homes in Sacramento is $475,136, an increase of almost 15% from last year. The city real estate market has an estimated 4.5 weeks of supply, meaning it would take about 4.5 weeks for all of the houses currently on the market to sell. There have been 381 new listings, added to the 1,960 current active listings, which stay on the market for an average of 12.3 days each. As for rentals, the median monthly rent is $2,228, and the price-to-rent ratio is 17.77, meaning renting in Sacramento is generally more affordable than buying.
There are many factors contributing to Sacramento’s growth, and these factors indicate that the growth won’t be stopping any time soon. One major factor is Sacramento’s proximity to other prominent and successful cities; namely, San Francisco and San Jose. In addition to drawing attention for its own economic growth, it is commonly seen as a cheaper alternative to these larger, expensive cities. Median home prices in Sacramento are over 54% lower than the state average. This is combined with the trend that more people are working from home, allowing them to search for cheaper living alternatives away from the office. These trends will continue to drive more people into Sacramento in the coming years.
In addition to population and economic growth, inventory constraints and national increases in housing demand are contributing to the market’s upward trend. The low number of available listings indicates that many potential buyers are pushed into the rental market. This already high competition fueled with increasing demand should lead to increases in appreciation rates in the near future; not to mention the impact of the COVID-19 pandemic.
Initially, the pandemic brought all market activity to a screeching halt. However, the market sprung back almost as quickly as it stopped, as federal interest rates were dropped to historically low levels in order to stimulate buying activity, combined with improvements in unemployment rates. Buying will remain high, however inventory remains low as COVID also caused breaks in new construction; thus, housing prices in Sacramento are expected to rise throughout 2022 and into following years.
All of these considerations indicate that even in a seller’s market, Sacramento remains a strong real estate investment with expected continued growth in the foreseeable future. The city’s stable and diverse job market, low cost of living relative to the California average, and high quality of life make Sacramento a strong, promising investment. The top three neighborhoods for real estate investment are River Park, Pocket, and Westlake.
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