2023 Sacramento Rental Market – A year of transition
After a hot 2021-2022, the Sacramento rental market cooled noticeably in 2023 as new supply outpaced demand. Here's an overview of key trends:
Market Temperature: Cooling Down
A flood of new apartment construction in central Sacramento led to increased vacancies and downward pressure on rents in 2023. Occupancy dropped below 95% across the metro. However, demand rebounded somewhat in Q3, suggesting the market could be stabilizing.
Sacramento Rent Trends: Declining
In response to the supply influx, rents fell 6.65% between December 2023 and December 2022 (2024 rental report) - a stark change after rapid growth in 2021-2022.
National Rent Trends: Declining
Rent growth nationally is being diminished by lackluster demand and seasonal trends. One factor contributing to downward pressure on rental markets is a construction boom, which in recent years has led to rising supply and vacancies. In response, landlords and management companies are offering tenants a host of concessions and perks, from a month of free rent to flexible lease terms, in a bid to boost leasing activity.
Investment Outlook: Cautious Optimism
Investors are taking a cautious approach in the face of high new supply. Developments may face concessions and longer lease-up periods. However, market conditions could improve in 2024 as demand rises, presenting opportunities in existing assets.
Sacramento Sales Market
2023 was a tough year for sales, with the lowest volume in decades. High interest rates for buyers and many owners sitting on very low rates, combined to cool the sales market significantly. Although current interest rates seem extremely high, they have been much higher in the past. For some good historical perspective on the market, check out this blog: The housing market has a 80’s vibe.
The Takeaway
2023 was a transitional period for Sacramento as supply and demand rebalanced. While the market cooled, indicators point to a potential return to stability in 2024. Still, flexibility and preparation will benefit both property investors and renters navigating the evolving conditions.
