Ladies and gentlemen, good morning/afternoon/evening! Today, we dive into the Sacramento rental market, analyzing its performance throughout 2023 and offering insights for investors, landlords, and renters alike. Let’s begin with a quick overview:
· Market temperature: Cool, with demand and supply reaching a more balanced state.
· Rent growth: Negative, with a 2.3% decline over the year.
· Occupancy rate: Below 95%, but showing signs of stabilization.
· New supply: Rising at record pace, putting upward pressure on cap rates.
Now, let’s delve deeper:
Demand and Supply: The Sacramento rental market witnessed a significant shift in 2023. The influx of new supply, particularly in central Sacramento, initially outpaced demand, resulting in rent reductions and softening occupancy rates. However, the third quarter saw a rebound in renter interest, with some urban areas even absorbing more units than delivered. This suggests a stabilizing market with potential for modest rent increases in the near future.
Rent Trends: As mentioned, rents decreased by 2.3% in 2023 compared to the previous year. This decline was primarily driven by Class B and C units, while premium Class A apartments saw modest gains. The median rent currently sits at $1,643, ranking Sacramento as the 32nd most expensive large city in the US (Apartment List, January 2024).
Investor and Landlord Outlook: With softer market conditions, navigating the waters in 2024 requires careful consideration. Investing in new construction might be less attractive, while existing properties in desirable locations could offer better returns. Offering concessions like free rent or reduced deposits might be necessary to attract tenants. However, the expected stabilization of occupancy and potential rent increases in the coming year provide a positive outlook for the medium-term.
Renter Outlook: Good news for renters! The increased availability of units and cooling rental market present an opportunity to find better deals and negotiate lease terms. However, be prepared for rising competition as demand picks up, especially in desirable neighborhoods.
In conclusion, the Sacramento rental market experienced a transitional year in 2023. While rents fell and occupancy rates dipped, the market appears to be finding its balance. For all stakeholders, staying informed about trends and adjusting strategies accordingly will be key to navigating the evolving landscape in 2024.
Sources:
· Colliers International, Sacramento Multifamily Market Reports (Q2 & Q3 2023)
· Apartment List, Sacramento Rent Report (January 2024)
· M&M Property Management, The Sacramento Rental Market: A Fall 2023 Overview
· Zillow Sacramento Housing Market Report (October 2023)
Thank you! I hope this report provides valuable insights into the Sacramento rental market. Feel free to ask any questions you may have.