Re: Sacramento Landlord thing getting worse… - Posted by David H
Posted by David H on February 15, 2002 at 16:32:46:
It seems that this might be aggravated somewhat by the continued rise in rents as per www.realfacts.com
February 8th 2002
SACRAMENTO. THE BRIGHT SPOT IN THE WESTERN REGION MULTIFAMILY MARKET.
Sacramento has the most vibrant residential rental market in the west. Our December survey found that in the fourth quarter of 2001, average rents rose by 1.5% over the previous quarter. This increase brings the average rent for all unit type to $843, and is a 9.6% increase for the year 2001. That has been the average rate of increase for the past four years.
Ten years ago, the notion that Sacramento would one day be the bright spot in the multifamily market seemed laughably deluded. Even five years ago, average rent gains of more than $10 or $15 a year seemed ambitious. But the tide began to turn about four years ago, with steady gains every year. It is especially remarkable that the increase has continued, since conventional wisdom suggested the initial strength in the market was due to the huge increase in Bay Area rents, which drove renters ever farther afield until they finally went all the way to Sacramento. But now rents in the Bay Area have fallen by anything from 12% to 22% — and the Sacramento MSA is still going strong.
One explanation is that Sacramento County planning restraints halted new construction for a number of years. With supply thus limited, any increase in demand had to be met with higher prices, according to the law of supply and demand. Even now that building has been resumed, supply still lags far behind demand, so prices are still going up.
The Sacramento economy has also been strong, with the unemployment rate rising only .4% from January to December 2001, one third of the national rate. This factor has helped to maintain the growth of demand and suggests that the conventional wisdom may not have been wise enough to realize that the more varied employment base in the area, including the large government work force, has helped Sacramento avoid the rent and occupancy regression which more one-industry reliant markets, such as the Silicon Valley, experienced in 2001.
Just as important as rent levels in judging the health of a housing market is the change in the occupancy level. Nearly every other market in the western region has sunk down to the lower 90 percent range, but Sacramento still holds at 95.6%, extremely high for this recessionary quarter.
With estimates of employment growth this year ranging from 12,000 to 15,000 the prospects in this area look rosy for the future.
Caroline S. Latham