Why Invest in Sacramento
Sacramento is the capital city of California and the seat of Sacramento County. Located at the confluence of the Sacramento River and the American River in Northern California's Sacramento Valley, Sacramento's estimated population of 501,334 makes it the sixth-largest city in California and the ninth largest capital in the United States. Sacramento is the seat of the California Legislature and the Governor of California, making it the state's political center and a hub for lobbying and think tanks. Sacramento is also the cultural and economic core of the Sacramento metropolitan area, which had a 2010 population of 2,414,783, making it the fifth largest in California.
There are four great reasons to invest in the Sacramento rental market. Population growth, affordability and price appreciation, job growth, and rent appreciation.
The capital city was, by the far, the fastest growing major city in the state in 2018, gaining more than 7,000 residents and adding more than 2,350 new housing units, much of it in midtown, downtown and North Natomas. Population growth is a critical factor in determining the health of any economy. With rising numbers comes more jobs, more economic activity, and more demand for housing. Whether people come to Sacramento for the great weather, a job, or to raise a family in a quiet setting, population growth is key.
Affordability and Price Appreciation
While these are competing forces, Sacramento remains affordable while seeing prices steadily increase just above the rate of inflation. “We expect home prices to rise at a slower rate than in 2019, around 3.4 percent rather than 2019’s 4.7 percent,” Zillow economist Jeff Tucker wrote. That should represent a small step toward making housing more affordable in Sacramento after double-digit percent price increases here and around the state in the past decade led to a historic decrease in affordability. By 2018, only four in 10 Sacramento residents could afford a median priced home, which at the time was $374,000. The median sales price for a Sacramento County house hit $385,000 near the end of 2019, according to the California Association of Realtors. Based on Zillow’s estimates, that suggests the county’s median sales price would be $400,000 by the end of 2020. That said, there are many homes priced from $200,000 to $350,000 in decent neighborhoods. First time home buyers can afford a starter home and flippers can make a living in the greater Sacramento region. Sacramento is an affordable location in the great state of California.
The Sacramento-area unemployment rate stands at 3.8 percent as of June, up from last month’s record low of 3.1 percent in May but still below the unemployment rate one year ago at 3.9 percent, according to the California Employment Development Department. This takes into account Sacramento, Placer, El Dorado and Yolo counties. Since last June, total jobs in region increased by 17,800, or 1.8 percent, the EDD said. Job growth pays the rent and has been a steady driver of Sacramento’s healthy economy.
According to Zilpy.com, during the month of June 2019, Sacramento, CA metro rents compared with same month of last year, saw an average increase of 3.09% for 1, 2, 3, 4 bedroom rentals. While that rate of increase is just above inflation, when combined with price appreciation, it represents a healthy 6.5% total return.
Yes, Sacramento is a great place to invest. At HomeRiver we have clients who have been with us for over 30 years building their retirement using real estate as the cornerstone.