In the ever-changing landscape of California’s real estate, Sacramento has emerged as a hub of interest for homebuyers. As the state’s capital, it presents a unique blend of urban sophistication and suburban comfort. It boasts secluded neighborhoods and opulent residential offerings, providing a laid-back lifestyle. All these are wrapped up in a relatively more affordable package than nearby cities, such as Los Angeles and San Francisco.
With the changing nature of real estate markets comes uncertainty, though. It’s essential that investors stay informed about the Sacramento housing market. This article will help aspiring homebuyers and sellers gain valuable insights into the Sacramento property market. It will provide a Sacramento housing market forecast.
Sacramento Housing Market Trends
The Sacramento real property market is a hotbed of activity. It offers value for money and investment potential. As a testament to its solid and steady performance, the outlook for 2023 is primarily positive, as shown below.
Median Listing Price
One of the standout indicators of the strength of the Sacramento realty market is its median price. The median price was $496,000 as of July 2023. This was a decrease of 2.8% from July last year.
This makes it an opportune time to invest in Sacramento real estate. The market also presents a budget-friendly option for those who find house prices in neighboring cities high.
Inventory Levels
Sacramento’s real estate inventory is tighter than ever. Only 1,564 homes were available for sale in August 2023. Additionally, there were only 188 listings in the same month. This is the lowest inventory level in years. A sense of urgency among buyers due to high buyer demand is the primary driving factor behind low inventory levels.
This is an excellent opportunity for sellers to list their properties as demand is guaranteed. For sellers, this also means their listings will likely attract multiple offers. Their listings are also likely to sell above the asking price.
However, buyers are finding themselves in a challenging position. As a result, they need to act swiftly and decisively, as homes are not just costly but also scarce.
Buyer Demand
This year, buyer demand has been outstripping supply and creating a favorable environment for sellers. This imbalance has resulted in a competitive seller’s market — properties are selling at prices above the asking rate.
The high demand can be credited to a variety of factors. Sacramento’s comparative affordability and high quality of life are key drivers. In addition, the city’s growing job market has been attracting prospective homebuyers.
The heightened buyer demand reveals the attractiveness of Sacramento as a residential destination. This environment offers sellers quick sales and potentially lucrative returns on their investments. For buyers, it holds a promise for strong appreciation in the future.
Median Days on the Market
The Sacramento housing market is buzzing with activity. This is as a result of the high demand and low inventory. On average, a listed property in Sacramento is sold in just 10 days. This is substantially lower than the national average of 54 days.
Available homes are receiving four offers on average. As a result, bidding wars have become a defining characteristic of Sacramento’s housing market. With such a competitive landscape, buyers must be prepared to act swiftly and negotiate effectively to secure a deal.
On the other hand, sellers enjoy the benefits of a seller’s market. They can expect to receive offers above their asking prices.
Sales Volume
Parallel with the heightened demand and dwindling inventory, sales activity in the Sacramento property market is significantly high. In July 2023, 372 homes were sold. Although a decrease from the 478 figure recorded during the same month last year, this figure still translates to a healthy housing market. This is especially true considering the rising home values, which have been affecting sales.
The high sales volume indicates the vigorous market activity caused by heightened buyer competition. It also underscores the value of homes in the region.
Economic and Demographic Factors Driving the Sacramento Housing Market
Several factors are contributing to the dynamics of the Sacramento real property market. Understanding these factors can help potential investors make informed decisions about buying or selling properties in the Sacramento area. Below are some of the key factors affecting the Sacramento housing sector.
Impact of the Pandemic
The Sacramento property market experienced remarkable growth from 2009, after the Great Recession, to early 2020. However, the COVID-19 pandemic disrupted a flourishing real estate landscape.
All real estate activities ground to a halt due to uncertainty. Sellers withdrew their listings, and potential buyers were reluctant to tour homes. However, the market rebounded nearly as quickly as it had stalled.
The Federal Reserve lowered interest rates to about 3.45% to stimulate the economy. Buyers were motivated to act swiftly to take advantage of the low rates. This led to a surge in market activity.
Construction activity also resumed after a period of disruption, increasing inventory. The widespread adoption of remote work also made prospective homebuyers reconsider living arrangements. Buying a larger home with a home office and access to outdoor and recreational spaces became desirable. This, in turn, led to increased demand for suburban homes.
Economic Growth
Economic growth is another pivotal factor influencing the Sacramento real estate market. The region has witnessed significant economic development over the past few years, leading to a diverse job market and increasing population. This economic prosperity has also led to a rise in median household incomes, thus boosting the purchasing power of residents.
Being California’s capital, Sacramento boasts a large number of public sector jobs. The public sector usually provides job security and a steady income, attracting potential homebuyers.
Consequently, a heightened demand for housing puts upward pressure on home prices. In addition, the robust tech sector presents the potential for further growth, further fueling the housing market.
As the economy continues to recover from the pandemic disruptions, it’s expected that this growth will maintain a steady upward trajectory, further influencing the dynamics of the Sacramento real estate industry.
Urban Development
As the city continues to grow and evolve, so does the demand for housing, especially in newly developed areas. Infrastructural improvements in transportation, public spaces, and amenities make these areas attractive to potential homebuyers.
There is also an increasing trend towards mixed-use developments, providing residences, shops, and offices in one convenient location. This development reduces commuting times and enhances the quality of life, contributing to the city’s attractiveness.
Furthermore, Sacramento’s commitment to environmentally sustainable urban development, with initiatives for green buildings and public parks, is another driving factor in the housing market.
With these urban development strides, Sacramento County continues to reinforce its position as an area capable of supporting a growing population and a dynamic housing market.
Rising Mortgage Rates
Another noteworthy factor is the rising mortgage interest rates. The average 30-year fixed-rate mortgage is 7.52%, while 15-year fixed-rate mortgages are offered at 6.79%. Increased rates mean higher monthly payments for homebuyers. This is reducing the pool of potential buyers.
On the other hand, the anticipation of more increments is creating a sense of urgency among prospective buyers. This is spurring them to secure a mortgage before rates climb any higher.
This dynamic has led to an initial surge in demand, further escalating home prices in the short term. However, the housing market may start to dampen if rates continue to rise. This is because homeownership will become less affordable for a segment of buyers.
Net Population Migration
In recent years, Sacramento has seen a positive net migration rate. Its population has grown from 524,943 in 2020 to an estimated 528,001 in 2022. The influx is partly due to people migrating from more expensive California cities. In addition, many tech companies are also setting up offices in Sacramento. This is due to the lower operational costs and the access to a talented labor pool.
Sacramento’s proximity to attractions, upscale amenities, and diverse local culture are also drawing in people. This migration pattern has bolstered demand for houses, worsening the supply-demand imbalance.
Sacramento Housing Market Forecast for 2023
Given the city’s unique blend of urban amenities and suburban tranquility, projections remain overwhelmingly positive. However, it’s crucial to analyze what industry insiders are saying in order to make informed decisions.
Rising Home Prices
Sacramento housing market forecasts predict continued growth for the foreseeable future. This is as long as demand remains strong and inventory stays low. Expert predictions suggest a profit potential of 2.54% in one year. Long-term investment is also a lucrative option, as the city’s median sale price is expected to rise by 11.92% in the next five years.
For investors and homeowners, this points to promising returns on investment and home equity gains. For aspiring buyers, it points to a potential investment or wealth preservation avenue.
Inventory Levels Will Remain Low
Sacramento housing market forecast indicate that housing supply will likely remain low. More people are expected to move into the city. In addition, existing homeowners will likely put off listing their houses waiting out the market. Zoning regulations may also lead to a limited supply of available homes. These factors will contribute to a decrease in housing supply, leading to increased competition between buyers.
Buyer Demand Will Remain Strong
High mortgage interest rates, as predicted by the Mortgage Bankers Association, might act as a dampener, slightly slowing the price appreciation rate. However, demand will likely eclipse this effect, leading to overall growth. This makes the market suitable for real estate investors.
Sacramento Real Estate Guidance for Buyers & Sellers
The current state and the Sacramento housing market forecast show that it’s currently ripe for investment. Sellers can expect quick sales and potentially higher-than-asking prices. On the other hand, buyers have the opportunity to secure properties at favorable prices with a high possibility for appreciation.
However, in such a competitive market, buyers and sellers need to strategize effectively. Due to stiff competition, buyers must brace themselves for the likelihood of paying more than the listed price.
Sellers need to maintain a realistic perspective regarding their asking price. An overpriced home may deter potential buyers and prolong the selling process. Conducting thorough market analysis and consulting trusted real estate agents can help price the property appropriately for a quick and profitable sale.
Sacramento Housing Market Snapshot
Now that you have a better understanding of the current state and the Sacramento housing market forecast, it’s time to highlight some key takeaways. These will serve as a quick reference for investors, sellers, and buyers.
The Sacramento real estate market’s current state signals opportunity for a good investment and caution for prospective buyers and sellers. For sellers, the market conditions are overwhelmingly in their favor. With a record-low inventory and high demand, listing your property now could yield quicker sales and potentially higher prices. However, a competitive pricing strategy is still crucial for attracting serious buyers.
For those looking to buy, the Sacramento market presents relative affordability compared to other Californian metropolitan areas, making it an attractive choice. However, the high competition and bidding wars call for quick and decisive action. Pre-approval for a mortgage and a sound understanding of the local market dynamics will be invaluable in navigating this market.
