In a blink of an eye, a new decade will be upon us. With it, there will be plenty of changes. This is true for the global market at large, and it is true for state and local real estate markets. With a population of over 39 million, the California real estate market is the largest state market in the US. California is home to a variety of city markets, many of which are expected to be profitable in 2020. One of these city markets is the subject of this blog: the Sacramento housing market. What does the Sacramento housing market forecast 2020 look like? Read this blog to find out!
Sacramento Housing Market 2020 Overview
As a rental market, the Sacramento real estate market capitalizes on many positive features of the California real estate market. The market is immensely profitable, both for traditional and Airbnb Sacramento investment properties. Sactown, like many cities in California, also harbors clear and reasonable Airbnb regulations. The traditional market is ripe due to the city’s rental demand and a growing economy. These real estate market trends, which we will explain in detail later, are the main reasons why the Sacramento housing market is considered one of the top cities in overall real estate and homebuilding prospects, according to the PwC’s Emerging Trends in Real Estate 2020 Report.
Sacramento Housing Market: City-Level Data
In order to understand the Sacramento real estate market trends and forecast, you’ll need to understand the market’s performance. Sacramento real estate investors can do so using Mashvisor’s investment property calculator, which you can learn about by clicking here. In the meantime, here is the city’s data according to Mashvisor’s calculator:
Pricing
- Median Property Price: $364,399
- Price per Square Foot: $250
- Price-to-Rent Ratio: 20
Traditional Investing
- Rental Income: $1,534
- Cap Rate / Cash on Cash Return: 1.4%
Airbnb Investing
- Rental Income: $2,671
- Cap Rate / Cash on Cash Return: 3.3%
- Occupancy Rate: 64%
Sacramento Airbnb Laws
As you have seen, we’ve provided the statistics of Sacramento’s traditional market along with the Airbnb Sacramento market. This begs the question, is Airbnb legal in Sacramento?
Related: 5 Cities Where Airbnb Is Illegal in 2019
Fortunately for Airbnb Sacramento real estate investors, the answer is yes. However, there are many Sacramento Airbnb laws investors need to be aware of. These include:
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Definitions and Permit
According to Airbnb Sacramento laws, a short-term rental is defined as a dwelling unit or portion of a unit for stays of 30 days or fewer. In order to operate an Airbnb Sacramento real estate investment, Airbnb hosts need a short-term rental permit. The application comes with a $125 fee and a $90 renewal fee. To apply for Sacramento’s short-term rental permit, click here.
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Business License
Sacramento real estate investors are also required to obtain a business license to operate an Airbnb non-owner occupied rental. The license includes an annual business operation tax of $54. The application for the business license can be found here.
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Transient Occupancy Taxes
Sacramento Airbnb hosts are required to pay a 12% Transient Occupancy Tax (TOT) for short-term rentals of 30 days or fewer. To learn about the TOT, click here.
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Operating Requirements
There are several operating requirements in the Airbnb Sacramento housing market that investors should know. For instance, hosts of a non-owner occupied rental cannot rent for more than 90 days in a calendar year without obtaining a special permit. Additionally, hosts that rent to more than 6 concurrent guests must maintain a rental registry for a three-year period.
Sacramento Housing Market Forecast 2020
The Sacramento housing market forecast 2020 is defined by many real estate market trends. There are four notable trends that will motivate any property buyer to invest in Sacramento real estate.
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Investors Will Find Affordable Real Estate
The California real estate market is infamous for its unaffordability. Fortunately, the Sacramento housing market is a very inexpensive alternative compared to other CA markets. For starters, the median property price in the city, according to Mashvisor, is $364,399. This is closer to the US housing market median ($328,400) than the Californian median ($693,843). Of the four best Sacramento neighborhoods (listed below), three of them have a median property price below $300,000.
Related: 4 Ways to Find the Most Affordable Real Estate Investments
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Investments Will Have High Rental Income and Appreciation
Rental income is the bread and butter of rental property profitability. Luckily for investors, the Sacramento housing market 2020 has plenty of rental income. As seen from Mashvisor’s data, Sacramento’s average rental income for traditional and Airbnb, respectively, are $1,534 and $2,671.
Sacramento houses for sale will also benefit from appreciation in 2020. According to Zillow, Sacramento home values will rise by 2.8% within a year and prices will likely follow. This is the same expected rate as the national average.
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There Will Be High Investor, Seller, and Tenant Demand in the Market
The Sacramento housing market will experience high demand from all players in 2020. As it pertains to being a buyer’s market or seller’s market, Sacramento is projected to be a hot seller’s market. Real estate investors will be a driving force for high demand in the market, according to the PwC.
Tenants are also increasing the demand for rental properties. Over half the population resides in a Sacramento rental property. It helps that Sacramento’s overall cost of living is lower than many of the state’s cities. According to Nerd Wallet, based on the average Californian household income, Sacramento’s cost of living is lower than San Francisco’s (by 73%), Oakland’s (by 35%), Orange County’s (by 28%), Los Angeles–Long Beach’s (by 26%), and San Diego’s (by 21%). So while many live in rentals, they still flock to the city for the low cost of living.
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The Market Will Benefit from Population and Economic Growth
One cause of the high demand in the Sacramento housing market is its population growth. According to the PwC, the population has increased by over 9 percent since 2010. This increase in population makes sense, given that Sacramento is consistently ranked as one of the best cities to live in. The city’s economy is another key feature of its real estate market and demand. Sacramento’s economy is the 12th best in the country, according to Business Insider. In 2016, Sacramento had a GDP growth rate of 4.0%, which was the 6th highest in the nation.
Best Neighborhoods in Sacramento: Traditional Investing
So, now you might be asking: where to buy rental property in Sacramento in 2020? According to Mashvisor, the best neighborhoods in Sacramento for traditional long-term rentals are Northgate and South Hagginwood.
Northgate
Pricing
- Median Property Price: $237,450
- Price per Square Foot: $168
- Price-to-Rent Ratio: 12
Traditional Investing
- Rental Income: $1,625
- Cap Rate / Cash on Cash Return: 3.4%
South Hagginwood
Pricing
- Median Property Price: $224,475
- Price per Square Foot: $211
- Price-to-Rent Ratio: 12
Traditional Investing
- Rental Income: $1,564
- Cap Rate / Cash on Cash Return: 3.3%
Best Neighborhoods in Sacramento: Airbnb Investing
What about for Airbnb investing? According to Mashvisor, the best Sacramento neighborhoods for Airbnb are Central Oak Park and Del Paso Park.
Central Oak Park
Pricing
- Median Property Price: $268,724
- Price per Square Foot: $218
- Price-to-Rent Ratio: 17
Airbnb Investing
- Rental Income: $3,925
- Cap Rate / Cash on Cash Return: 10.2%
- Occupancy Rate: 65%
Del Paso Park
Pricing
- Median Property Price: $322,997
- Price per Square Foot: $240
- Price-to-Rent Ratio: 17
Airbnb Investing
- Rental Income: $2,365
- Cap Rate / Cash on Cash Return: 6.6%
- Occupancy Rate: 77%
The Bottom Line
Is Sacramento a good place to invest in 2020? Absolutely! With high demand, profitability, and success for both rental strategies, the Sacramento housing market will continue to shine in 2020. To learn where and how to invest in Sacramento, or anywhere in the US, click here to start your 14-day FREE trial with Mashvisor!
Related: The Best Real Estate Investment Calculator of 2020
