Why there’s suddenly ‘very good news’ for Sacramento renters after three brutal years
Throughout the most brutal months of the COVID-19 pandemic, Sacramentans looking to rent an apartment or single-family home were confronted with one of the toughest markets in the nation.
The typical rent in the region increased by a remarkable 19.5% in 2021, the fifth-highest spike among the nation’s 50 largest metropolitan areas. After years of relative affordability, the rents in Sacramento suddenly were in the same range as those paid in Washington, D.C., Atlanta, Phoenix and Nashville, Tennessee.
This year could bring a complete reversal in the rental market.
Markerr, a relatively new real estate data analysis firm, reported this week that the Sacramento region is projected to see the smallest rent increases among the nation’s 100 largest metro areas. The company said rents in multi-family complexes will likely remain essentially flat in 2023, making the region the only one in the country not projected to see an increase.
“For the everyday person in Sacramento, this is probably very good news,” said Galen Faurot-Pigeon, a research analyst with the company.
The region’s falling home prices were a major factor in Markerr’s projection. The median sale price of a home in the Sacramento region has dropped significantly since peaking in May and is expected to continue falling in the months ahead.
“When the cost to own a home goes down, it makes it less likely multi-family (apartment) rent growth will increase,” Faurot-Pigeon said.
Other research firms have come to similar conclusions. Apartment List, a national rental listing and analysis company, recently found that rents in Sacramento dropped 2% over the past 12 months, tied for the second-steepest decrease in the nation. Rent.com said rents in Sacramento had increased overall in 2022, but had started to fall at the end of the year.
It’s important to note that many national online rental firms only have access to listings on their sites and not a market’s total rental picture. Ryan Lundquist, a Sacramento-based appraiser and real estate market analyst, expressed that word of caution in a blog post this week. However, Lundquist said it’s clear “rents have been going down locally and in many markets across the country.”
Lundquist noted the change in rents in Sacramento is related to the overall cooling we’ve seen in the real estate market.
“There is definitely a relationship between rents and home prices, and both of these markets are showing similarities lately with dropping prices, increasing inventory, and longer days on market,” he wrote. “We’re also experiencing a similar dynamic with some sellers and landlords being out of touch and asking way more than the market will pay. Lastly, I think we’re in a place where lots of buyers and renters want to see more affordability after years of price and rent increases.”
This story was originally published January 26, 2023 at 6:00 AM.