Sacramento is in a housing boom. Will it be enough to satisfy the Bay Area migration?

The Sacramento region has become the hottest landing spot in California for people looking to buy a new house in a tumultuous 2020. And the trend looks likely to continue in 2021.

Home builders report they’re adding more new houses this year than any year since the Great Recession hit nearly 15 years ago, and expect to build even more next year.

Some 7,100 homes are expected to have been built in the four-county area by North State Building Industry Association members by year’s end. That’s 33% more than in 2019, making Sacramento the top metropolitan area in California for year-over-year housing growth.

In contrast, overall construction is down in California. Both Los Angeles and San Francisco saw fewer new homes and other living units built as of October this year during the COVID-19 pandemic than during the first 10 months last year. San Jose and San Diego held steady.

California continues to produce far less new stock than housing advocates say the state needs. And it is part of the reason California is losing residents to other states, notably to Texas, Arizona, Nevada and Washington, where housing is becoming limited as well, but typically costs less.

Builders in the four-county Sacramento region project 2021 to be an even bigger building year than 2020, with up to 8,000 new homes planned for construction, including infill town homes in downtown Sacramento, sprawling hilltop homes in Folsom and senior-living communities in Lincoln.

That includes the first several hundred single family houses in North Natomas at a major, 2,500-unit community called Northlake near Sacramento International Airport.

Fifteen years after it was first conceived under the name Greenbriar, the sprawling community is the latest development along increasingly busy Interstate 5, and serves as an example of how the Sacramento region is an outlier at the moment among California metropolitan areas.

New homes near Sacramento airport

Developer Integral Communities and builder Lennar Homes are among housing companies taking advantage of a unique moment in which Sacramento has become a refuge for Bay Area emigrees, including some well-paid tech workers, who cannot afford the bay’s atmospheric housing prices.

“The (Sacramento) market is very healthy as far as the demand for new homes,” said Bob Tummolo, local Lennar division president. “Fueling that is the low inventory or completed homes, lack of supply and low interest rates.”

Prices will be set when the homes go on sale in January, according to builder Lennar Homes. Houses range from 1,774 square feet to 3,425 square feet. Nearby new homes in Natomas range near $250 per square foot, which suggests possible housing prices of $450,000 at the low end.

The bay-to-valley migration pattern is not new, but real estate watchers and economists say it has increased this year during the COVID-19 pandemic as more people telework from home and do not have to live as close to the office as they would if they commuted daily.

“Bay Area buyers definitely have been a good part of our sales and our market in Sacramento,” Tummolo said. “You can now live in Sacramento and work for a Bay Area-based company, working remotely.”

The Esplanade at Turkey Creek, an age 55-plus community in the fast-growing Placer County city of Lincoln, also broke ground this month, aimed in part at Bay Area retirees and near-retirees.

Overall, California new home construction was down this year compared to 2019, according to the U.S. Census. As of October, builders had obtained 84,600 housing permits in 2020, down from 89,900 last year.

Gov. Gavin Newsom and Democratic leaders have been pushing for ways to increase those numbers, but the effort slowed this year during the coronavirus pandemic.

California housing construction falls behind

California, the most populous state, ranked a distant third nationally in housing construction as of October, behind Texas and Florida, both of which are producing more units this year than they did in 2019, according to the U.S. Census.

That makes Sacramento among the few areas in California that has made a dent this year in its housing shortage. It’s dealing with a major backlog, though.

“A lot of these projects were on the books for years,” said Michael Strech, head of the North State BIA, but didn’t get built because of the recession and other woes, including lack of a labor force.

“The timing is now,” he said. “It’s a not a single thing. Whether it is millennials getting the confidence to buy. Or whether it is Bay Area migration. Interest rates continue to be at historic lows.”

At the same time, though, prices are going up, the continuation of a nearly decade-long trend of price increases that are putting home-ownership out of range for many medium- and lower-income workers.

Those price increases have been driven in part because Sacramento is suffering from a historically low amount of existing resale-home inventory in 2020.

Overall, house prices in the Sacramento area went up 7.5% in the third quarter of this year over the same period last year, slightly higher than the state average of 7.2%, according to data released last week by the Federal Housing Finance Agency.

The median price of a home in the Sacramento region hit $483,000 in October, a 16% increase over the same month in 2019, according to a data analysis by Ryan Lundquist of SacramentoAppraisalBlog.com.