Housing Prediction: Sacramento One of the Hottest Markets in 2017

Earlier this month, the real estate information company Zillow published a report that listed what they feel will be the ten hottest U.S. housing markets of 2017. Sacramento, California was ranked as the tenth hottest housing market for 2017.

Sacramento was the only California city to appear on the list, which was led by Nashville, Seattle and Provo in the top three spots.

Strong Predictions for Sacramento Housing Market in 2017

To create its forecast, the company said it “looked for places with quickly rising home values, low unemployment rates and strong income growth.” While Sacramento’s unemployment rate is still above the national average, as of January 2017, it definitely checks the other two boxes.

The city’s median household income rose by nearly 5 percent last year to reach $62,800, according to U.S. Census Bureau data. That was the fastest year-to-year jump in at least a decade, and the highest median income level since 2009.

Home prices within the Sacramento housing market have also made significant gains in recent years. According to Zillow, prices rose by more than 11% during 2016 alone, which is well above the national average.

The company expects bigger-than-average price gains in 2017 as well:

“California’s capital, Sacramento, is one of the more affordable large metros in the state. Home prices are rising quickly, but are still 58 percent less expensive than the median Bay Area home. Zillow forecasts Sacramento home values will appreciate almost 5 percent over the next year.”

Inventory Tight Due to Limited Construction

But the real story here is inventory, or a lack thereof. There is currently a lot of demand for housing in the Sacramento area, but not enough supply to meet it.

In fact, the city recently appeared on another top-ten list for housing markets that focused on supply shortages. On January 16, Realtor.com published a list of the 10 U.S. cities with the biggest housing shortages. These are cities where supply is well below demand. The Sacramento real estate market was ranked at #6 on the list. (Seattle, Washington was #1.)

According to the report, only 0.6% of the total housing stock was available for sale.

“The root cause of the low inventory is the lack of newly built homes,” the report stated. “Construction activity in [Sacramento] has been consistently behind the national average since the last housing bust, according to the National Association of Home Builders’ Leading Markets Index.”

This inventory shortage is largely what’s driving the bold housing market predictions for Sacramento in 2017. The economic research team at Zillow, for example, expects home prices in the city to rise by around 6.1% over the next 12 months (January 2017 – January 2018). That’s well above the 3.5% increase they projected for the nation as a whole.

Home Buyers: Be Prepared for Competition

Sacramento home buyers should be prepared for stiff competition when entering the real estate market. Low-inventory conditions are forcing buyers to compete, sometimes fiercely, for desirable properties.

In this kind of housing market, it’s important to have your financing arranged before making an offer on a house. For cash buyers, this means having the money in the bank with statements to prove it. Home buyers using mortgage loans can improve their chances for success by getting pre-approved for a loan, before entering the market. And that’s where we can help you.