Comparative Analysis of Sacramento, San Francisco, and San Jose (2024-2026 Outlook)
- Executive Summary
This report delivers an in-depth analysis of the current rental market conditions in Sacramento, San Francisco, and San Jose, providing a forward-looking forecast for 2025-2026. It highlights crucial market drivers, supply-demand dynamics, and the influence of policy initiatives, culminating in a comparative assessment of these distinct California regions. The analysis synthesizes data from various sources, addressing nuances and potential contradictions to offer a comprehensive and authoritative perspective for stakeholders. - Key Findings:
Sacramento: Positioned as California’s affordability alternative, Sacramento’s rental market experienced moderate growth in 2024, with some recent stabilization and even slight dips in certain segments, particularly for 1- and 2-bedroom units. Vacancy rates remain low, driven by consistent demand from a strong job market and ongoing migration from more expensive Bay Area cities. While new construction is underway, it has not fully met the accumulated demand, though state initiatives aim to increase affordable housing supply. Projections for 2025 suggest continued modest rent increases despite recent short-term declines, indicating a maturing market with sustained underlying demand.
San Francisco: Characterized by significantly higher rents, San Francisco’s multifamily market is experiencing a robust rebound. Average rents have reached record highs as of early 2025 and are projected to increase by over 4% in 2025. The market benefits from a return to population growth, an improving economy, and high barriers to homeownership that funnel demand into rentals. Despite high office vacancy rates, residential demand remains strong, though strict zoning laws, bureaucratic hurdles, and high construction costs continue to severely constrain new housing supply. Rent control regulations also play a role in limiting increases for certain older properties.
San Jose: A high-cost market driven by the robust tech industry, San Jose’s average rents are comparable to San Francisco, showing steady increases. While the apartment market showed signs of slight moderation in late 2024, overall demand remains high due to strong job growth and persistently limited housing supply. Regulatory reforms (CEQA streamlining) and significant affordable housing projects are being implemented to address supply shortages, but the high cost of construction remains a significant barrier. A notable trend is higher vacancy rates in Class A (luxury) apartments compared to more affordable units.
- Comparative Observations: Sacramento consistently offers a substantial affordability advantage, attracting residents from its more expensive Bay Area neighbors. All three markets grapple with fundamental supply-demand imbalances. However, San Francisco and San Jose face more acute land constraints and more stringent regulatory hurdles for market-rate housing, while Sacramento benefits from comparatively looser zoning. Economic conditions, particularly high interest rates, exert a universal influence, making homeownership less accessible and thus pushing more residents into the rental market.
II. Sacramento Rental Market: Current Conditions (2024-2025)
The Sacramento rental market in 2024 and early 2025 presents a complex picture of sustained demand alongside moderating rent growth and varied performance across different property types. The city continues to attract residents due to its relative affordability compared to other major Californian metros, yet it faces its own challenges in balancing supply with a growing population.
- Average Rent Prices and Recent Trends: Current average rent figures for Sacramento vary across reporting agencies, reflecting differences in methodology, geographical scope, and reporting dates. As of February 2025, Rent.com reported the average rent at $1,607. MM Properties cited an average of $1,650 per month in May 2025. RentCafe indicated a slightly higher average of $1,891 in May 2025 and $1,889 in March 2025, noting an average apartment size of 825 square feet. Zillow data for specific Sacramento sub-markets show average rents of $1,800 in zip code 95842 as of July 2025 and $2,251 in West Sacramento in July 2025. ApartmentAdvisor reported median rents in July 2025 as: Studio $1,409, 1-bedroom $1,500, 2-bedroom $1,900, and 3-bedroom $2,675.
Year-over-year (YoY) and month-over-month (MoM) changes reveal a segmented market. Rent.com data from February 2025 indicated a modest 0.4% YoY increase in average rent, marking the first gain in six months, alongside a 0.6% ($10) MoM increase. However, a closer look at bedroom types showed 0–1-bedroom units rising 0.4% YoY, 2-bedroom units rising 0.6% YoY, while 3+ bedroom units experienced a 0.5% YoY decline. In contrast, MM Properties reported a significant YoY decrease of approximately $245 in May 2025 compared to May 2024, with a small MoM decline of $17 from April to May 2025. ApartmentAdvisor/Rent.com data from July 2025 further highlighted varied YoY changes by bedroom type: Studio +7%, 1-bedroom -14%, and 2-bedrooms -17%. Zillow data for 95842 showed a +$100 YoY increase and -$200 MoM decrease in July 2025, while West Sacramento recorded a +$351 YoY increase and +$56 MoM increase in July 2025.
The conflicting year-over-year trends, with some segments showing positive growth and others experiencing declines, particularly varying by bedroom count and sub-market, are not necessarily contradictory. Instead, they point to a highly segmented and dynamic market. The reported decreases in 1-bedroom and 2-bedroom average rents, along with the overall average decline from some sources, suggest that while demand remains consistent, renters are becoming increasingly sensitive to pricing. This trend can be attributed to the broader “affordability squeeze,” where elevated interest rates and high home prices push more individuals into the rental market, yet their financial capacity to afford higher rents or upgrade to larger units is constrained. The economic uncertainty and higher interest rates reduce the purchasing power for homeownership, compelling a larger segment of the population to remain in or enter the rental market. This sustained influx of potential homebuyers provides a strong underlying demand, but at the same time, their financial caution can lead to a preference for more budget-friendly options. This dynamic limit the ability of landlords to significantly increase prices, particularly for more expensive or larger units. Consequently, property managers and investors in Sacramento may find it beneficial to prioritize demonstrating value and potentially offering more competitive pricing or flexible lease terms, especially for higher-end units, to appeal to this cautious renter base.
Historically, rents in Sacramento have remained relatively stable for over two years, following a period of aggressive growth in 2021 and 2022. Despite recent fluctuations, prices are still 5.6% below their record high of $1,704 set in August 2022. Zillow data also indicated a slight downward trend from an average of $1,993 in January 2024 to $1,971 in March 2025.
Current Average Rent Levels and Affordability Comparison
The stark contrast in average rent levels underscores the affordability divide across these Californian cities.
Sacramento: Average rents are generally in the range of $1,600 to $1,900, with some sub-markets like West Sacramento reaching $2,251. For context, Sacramento’s 95842 zip code is 14.81% lower than the national average of $2,113, though West Sacramento is 6.53% higher.
San Francisco: Average rents are significantly higher, ranging from approximately $3,200 to $3,507. Median rents for 2-bedroom apartments can reach $4,895. In 2024, rental prices for a quality-adjusted dwelling in San Francisco topped $3,000 per month. A zip code (94030) showed rents 60.57% higher than the national average of $2,100.
San Jose: Average rents are comparable to San Francisco, with Zillow reporting $3,209 in July 2025 and RentCafe reporting $3,137 in June 2025. San Jose rents are 51.87% higher than the national average of $2,113.
The data consistently highlights a substantial affordability gap, with Sacramento’s average rents being roughly half to two-thirds of those in San Francisco and San Jose. This significant difference is the primary economic catalyst driving population migration from the highly expensive Bay Area to Sacramento. This migration, in turn, sustains demand in Sacramento’s rental market. Sacramento’s role as a relatively more affordable alternative within California is crucial for regional housing dynamics. This dynamic is likely to persist as long as the cost disparities remain significant, positioning Sacramento as a key destination for those seeking more attainable living costs.
It is important to acknowledge that national average rent figures cited across different sources can vary (e.g., $2,113, $2,100, $1,607, $1,749). This report uses the most consistently cited figures were available, but readers should be aware that national averages can differ based on the data provider’s methodology and reporting period.