Sacramento, CA Housing Forecast Through Summer 2021

Highlights from this housing report:

• One forecast predicted the Sacramento housing market could cool down.
• But that will likely be a temporary trend that improves in late 2020 / early 2021.
• This housing market remains active, despite the COVID-19 situation.
• A shortage of homes for sale is boosting competition among buyers.

According to recent reports, home prices within the Sacramento-area real estate market have leveled off in recent months. That’s to be expected, given the current economic downturn resulting from the coronavirus health crisis.

But the Sacramento real estate market was very active and competitive going into the current downturn. So it’s likely that home prices will regain steam again toward the end of 2020 or early 2021.

Real Estate Outlook for Sacramento, California

In June 2020, the housing and economic research team at Zillow issued a forecast for the Sacramento real estate market extending into early summer of 2021. By their estimate, home prices in the area will essentially flatten over the coming months.

To quote their June forecast:

“Sacramento home values have gone up 7.9% over the past year and Zillow predicts they will fall -0.0% within the next year.”

The chart below shows home-price trends in the area over the past decade or so, along with the company’s forecast for 2021.

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But homeowners in the Sacramento area shouldn’t despair. The most likely scenario is that home prices will level off during the economic downturn, and begin to rise again later this year or early in 2021 as the crisis eases.

This forecast for the Sacramento real estate market is based on two overriding factors. Supply and demand. This housing market is currently experiencing a severe shortage of inventory. Demand from home buyers, meanwhile, remains fairly steady in spite of the public health crisis.

So let’s talk about those trends next.

A Tight Housing Market with Limited Inventory

The Sacramento area real estate market remains competitive, with home buyers trying to outmaneuver each other in the search for homes. This is largely due to limited inventory within this housing market.

According to data published recently by the national real estate brokerage Redfin, Sacramento had about a 1.8-month supply of homes for sale in May 2020. That was well below the national average for that same month, and also below most other major metro areas in the US.

So, we are talking about a highly competitive real estate market where buyer demand is outpacing the available supply. Historically speaking, home prices tends to rise when there is this kind of supply and demand imbalance.

And that has certainly been happening in Sacramento over the past few years. According to the latest reports, the median home price in Sacramento rose by around 8% over the past year alone.

Looking forward, forecasts for the Sacramento real estate market through 2020 and 2021 are more conservative. That’s due to rising unemployment and other economic woes.

But these are temporary conditions. California is currently in a multi-stage economic reopening process. And some economists believe that the real estate market (which continues to move forward) will help pull the broader economy out of the doldrums later this year or in 2021.

So while the short-term forecast for the Sacramento real estate market predicts that prices may flatten going into early 2021, we have to remember that real estate is a long-term strategy.

Faster-Than-Average Home Sales

According to a recent report, homes listed for sale in Sacramento, California spent a median of 11 days on the market before going under contract in May 2020. That number indicates a fast-moving real estate market where homes tend to sell quickly.

The nation as a whole had a median “days on market” of 37 in May. So the Sacramento real estate market is still hustling along.

It’s worth noting that the coronavirus situation was well-established in the United States during May 2020. So the figure above is a fairly accurate indicator of how this market is handling the public health crisis and economic downturn.

Home Buyers Continue to Flock to the Area

The real estate market in Sacramento is also getting a boost from population growth. Over the past few years, we have seen a migration pattern where people are relocating from the pricier coastal real estate markets to inland destinations like Sacramento.

According to the latest Census Bureau figures, Sacramento’s population grew by around 10% from 2010 to 2019. That’s not surprising when you look at how home prices in Sacramento compared to other major cities in California.

As of June 2020, the median home price in Sacramento was around $363,000. Compare that to the medians for San Diego ($680,000), Los Angeles ($752,000), and San Francisco ($1.4 million), and it’s easy to see the appeal of the Sacramento housing market.

Sacramento Was Doing Okay Going into the Crisis

In closing, let’s back up a few months and look at where the Sacramento real estate market was earlier this year.

Back in March, the research team at Realtor.com published a ranking of the 20 “hottest housing markets” in the U.S. for the month of February 2020. In the #5 position was the metro area of Sacramento-Roseville-Arden-Arcade.

Sacramento’s appearance on this particular list is largely the result of the skewed supply and demand situation we covered earlier. Back then, and even now, the number of active buyers in the market exceeded the number of homes for sale. That puts upward pressure on house values.

Granted, the Sacramento real estate market is now getting some downward pressure from economic uncertainty and unemployment. But those are temporary trends that will fade with time.

Disclaimer: This article includes forecasts for the Sacramento real estate market through 2020 and into 2021. Those statements were issued by third parties not associated with our company. Housing predictions and projections are the equivalent of an educated guess and should be treated as such.