Sacramento is the capital city of California and holds the number one spot as the largest city in Sacramento County. Forbes named the city the best place to live in California after considering factors such as the median home price, unemployment rate, crime rate, and more.
Compared to San Jose, San Francisco, and Los Angeles, Sacramento appears to be reasonably priced in terms of housing. Still, when viewed from other parts of the United States, Sacramento is regarded as a high-cost metropolitan area.
Recent market activity suggests that home prices have taken a step back, which could provide much-needed relief to real estate investors in the city.
If you would like to buy or sell a home in Sacramento, it helps to know about the local market. Read on to learn all you need to know about the real estate market in this sought-after city.
What Is a Real Estate Market?
Before discussing trends and statistics, let's first make sure we're clear on what a "real estate market" is.
Put plainly, a real estate or housing market is a pool of buyers and sellers. It's important to consider the market before you purchase or sell a property to determine whether it would be a profitable move.
The market is influenced by various factors, such as mortgage interest rates, government regulations, housing supply, and more, which we will discuss later in this article.
Sacramento Housing Market Trends
We took a look at some of the statistics and trends from Redfin to help you understand how the Sacramento real estate market fairs in comparison to national averages and previous Sacramento home prices.
- Median home sold price. Homes in Sacramento sold for an average price of $453 000 in March 2023, a 13 percent decrease from the same month the previous year.
- Number of days on the market. In Sacramento, properties typically sell after 26 days on the market as opposed to 8 days the year before.
- Properties sold in Sacramento. The city saw a decrease in the number of homes sold in 2023. In March of this year, 394 houses were sold, as opposed to 592 in March of 2022.
- Housing sale price vs. the national average. The median sale price in Sacramento is 16 percent greater than the national average.
- Cost of living in Sacramento. Sacramento's overall cost of living is 19 percent more than the country's average.
- Offers made. Numerous offers are made on properties in the city, some of which waive contingencies.
- Do properties sell for the asking price? Houses often sell for around the listing price and typically go pending in approximately 21 days.
- Hot homes. Sought-after properties can go pending in approximately seven days and sell for roughly 3 percent more than the asking price.
Factors That Affect the Sacramento Housing Market
It's important to understand the factors that will influence the cost of housing in Sacramento. We'll briefly examine some of them in the section below.
The Health of the Economy
An important factor that contributes to the health of the Sacramento housing market is the economy. A poor economy will lower the demand for housing or drop the median home price.
Fortunately, Sacramento's economy is booming, with more and more businesses viewing it as a better alternative to Silicon Valley and San Francisco, which has created many jobs and ensured the health of the economy and housing market.
Many variables, such as tax benefits, deductions, and subsidiaries, might affect the demand for property. With a solid grasp of current rules and regulations, you can evaluate supply and demand and identify potentially false housing market news.
Interest rates are another element that strongly influences the median selling price of homes in Sacramento. House prices and interest rates have an inverse relationship. Mortgage costs decrease along with interest rates, which increases demand for homes and raises real estate values.
In Sacramento, the current mortgage interest rate for a 30-year fixed loan is 6.89 percent. Investors can expect to pay 6.04 percent for a 15-year fixed loan and 6.22 percent for a five-year adjustable-rate mortgage.
The climate and weather patterns also impact the Sacramento housing market. After all, people will not be drawn to an area that is prone to earthquakes and floods. According to Redfin, Sacramento is at moderate to low risk for damage caused by weather conditions.
- Storm risk: Moderate
- Heat risk: Low
- Fire risk: Moderate
- Drought risk: low
Housing Supply and Demand
Like other parts of the economy, the Sacramento housing market is driven by supply and demand. A low supply and high demand could increase the median sale price and vice versa.
According to Redfin, there were 2.4 months of available housing in January 2023. This is a rise of 1.5 months from the previous year, which has lowered the median home price and contributed to a favorable market for buyers.
Another driving force in the housing market is the availability and diversity of jobs. Because Sacramento's economy is growing, with more companies settling there, it's safe to say that the creation of numerous job prospects has contributed to growth in the real estate market, despite the pandemic.
Sacramento Housing Market Forecast
Well, things seem to look good for now, but what does the future hold for real estate investors in 2023? Although we cannot predict the future with certainty, we can use historical data to forecast changes in the Sacramento real estate market.
Let's look at how experts believe the market will behave in the coming years.
Median Home Value
The value of homes in the Sacramento real estate market has been rising consistently over the past few years, and this pattern will likely continue in 2023.
Sacramento-Roseville-Arden-Arcade's median house value is $543,529. This is an increase of 0.7 percent over the previous year. This growth is encouraging since it shows that home values are rising steadily.
Since the start of 2023, the Sacramento real estate market has experienced a decline in property sales volume, with sales falling by 28.9 percent from the previous month. The average sale price has grown from $485,00 to $499,00, which is welcome news for sellers.
Despite a decline in sales volume, real estate investors are still drawn to the Sacramento home market since it has a one-year market estimate of -3.6 percent for the Sacramento-Roseville-Arden-Arcade region.
According to this Zillow projection, the housing market will continue to decline in 2023, making investments lucrative. Moreover, the city's real estate market will likely attract more investors looking to purchase properties in the area as a result of a decline in home prices.
Rental Prices in Sacramento
Sacramento was among the top 10 cities in the country for rent increases in 2020. Greater numbers of people are leaving major cities and relocating to nearby communities like Sacramento. While rent is falling in places like San Francisco, the move is raising rental costs in areas like Sacramento. Because there isn't a lot of available rental property, prices are rising.
Job Markets in Sacramento
In the early 2000s, San Francisco saw a period of decline. Because they rely so much on technological innovation to support the housing market, concerns about regulations and anti-trust action against Big Tech corporations could force the San Francisco area to experience a second significant fall.
There are a number of high-tech jobs in Sacramento, many of which are held by small businesses that moved there because of the area's reduced cost of living and conducting business.
The largest and most reliable employer in the city is the government. Construction and the healthcare industries also employ a lot of people. Sacramento benefits from a more stable work environment as well as low unemployment rates as a result.
As more individuals move here for the reduced cost of living, they tend to have more to spend on things like entertainment, which means that the tourism and service sector is also becoming a larger contribution to the overall growth of Sacramento's economy. This adds to the rising standard of living that will sustain the Sacramento housing market.
Sacramento Is Breaking Bad Trends
Although California's population is expanding overall, the trend is unhealthy. Native Americans have moved from the state to places like Oregon, Arizona, Idaho, and Nevada. Lower-skilled immigrants are taking their place in society.
As a result, the state's middle class is hollowed out, and poverty rates are driven sky-high. However, Sacramento is going in the opposite direction. Working-class and middle-class residents from across the state are moving there because they don't want to leave California.
This gives Sacramento property investors more choices than the exclusive luxury residences and tightly clustered inexpensive units that are constructed in San Francisco.
Should You Invest in Real Estate in Sacramento?
As we have seen, Sacramento offers great promise for investors. To help you determine whether buying a home in the city is worth your while, let's take a look at a few reasons why you should buy a property in Sacramento:
- Affordable entry price. Although Sacramento housing prices are above national averages, the median listing price of a home in the city is well below the state average, making it one of the best places to purchase real estate in California.
- Healthy real estate and rental market. Because of the allure of this big city, many see it as a sought-after area, which makes it an attractive place to own properties. The demand for homes in Sacramento has led to a boom in the rental market.
- Low cost of living. This is another key factor that many consider when looking for a place to live. Fortunately, Sacramento doesn't just have affordable homes, but it also boasts a low cost of living and a great quality of life.
- Diverse job market. Sacramento is attracting more companies as a less expensive alternative to San Francisco and Silicon Valley, which is another reason why housing is in demand in the city.
The Bottom Line
Buying or selling a home is one of the most important decisions you will make. This is why it's so important to do your research. There's no doubt that the housing market is booming in Sacramento, making it a great place for both buyers and investors.
Thanks to numerous factors, such as the booming economy, stable interest rates, and more, it has a stable real estate market. Plus, with the average rent prices rising, it's a fantastic place for investors to purchase rental properties.
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Frequently Asked Questions
Do you have more questions about the housing market in Sacramento? We answer some of the most-asked questions in the Q&A section below.
1. Should I sell my property in Sacramento?
Redfin statistics show that there were 2.4 months of housing supply in January of 2023, a rise of 1.5 months from the previous year.
Even though this gain provides much-needed relief for prospective homeowners, it still shows that the Sacramento metro area is still a seller's market. There is still a limited supply and a high demand, making it a great time to sell properties in the city.
2. Is a Housing Market Crash Imminent in Sacramento?
Although the median listing home price is down from last year, there is still a demand for houses in the city. This means that a crash in the market is highly unlikely.
3. What are some of the best neighborhoods in the city?
Here are some of the most sought-after cities in Sacramento that are worth considering if you're looking to buy a property:
- Central Oak Park
- South Hagginwood
- Youngs Heights
- Boulevard Park
- Midtown Winn Park Capital Avenue North
- Norwood I-80
- Glen Elder North
- Central Oak Park East
- Old Sacramento