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10 Reasons to be optimistic about Sacramento real estate in 2016

Business man drawing a house

1. Sacramento has been named one of the hottest markets to watch in 2016

Realtor.com recently published their list of the top ten up and coming real estate markets in the country for 2016, and our own Sacramento was included. Ranked at number four behind only Providence, St. Louis, and San Diego, Sacramento was a big winner on the list of markets where “where home buyers and sellers are the most motivated and active.” That’s definitely a huge reason for optimism for the Sacramento housing market in 2016!

Top 10 Real Estate Markets to Watch in 2016 according to Realtor.com

1          Providence, RI

2          St. Louis, MO

3          San Diego, CA

4          Sacramento, CA

5          Atlanta, GA

6          New Orleans, LA

7          Memphis, TN

8          Charlotte, NC

9          Virginia Beach, VA

10       Boston, MA

2. Plenty of other experts are bullish on Sacramento real estate

But it’s not just Realtor.com that’s expecting big things from Sacramento real estate in 2016. In fact, that optimism has been echoed by CNBC, CNN Money, Inman News, Money Talk News, Realty Today, Home Buying Institute, Housing Wire and Trulia – a virtual consensus of experts!

3. The interest rate hike will help stabilize growth

The Fed raised rates – and will do so again gradually. That’s a good thing because it means other economic factors like job growth, unemployment, etc. show enough promise that they feel they need to slow inflation. A slight bump in interest rates will also prevent the volatile cycle of boom and then crash that was prevalent in Sacramento, instead giving us sensible, steady growth in the housing market.

4. More loan products are helping new homeowners

Many would-be buyers can afford the monthly payment that comes with buying a home, but have a harder time amassing the 20% down payment we’re starting to see a larger offering of purchase loans that require less money down. 10% and even 5% down loans will continue to enter the market, and Fannie Mae FNMA and Freddie Mac have started purchasing loans with only 3% down payments, or 97% loan-to-value products, which is expected to improve access to those loans.

5. Western states are doing particularly well

In 2015, the largest price appreciation gains were seen in the western part of the country. Metropolitan areas like Denver, San Francisco, Austin, San Jose, Salt Lake City, San Diego and Seattle all experienced year-over-year gains of 10% or more. These western states, as well as most markets in California (like Sacramento!) are expected to stay hot in 2016.

6. New home construction is back

Over the last few years, Sacramento has been woefully short on new home construction, but in 2016 expect to see that change. In fact, Sacramento ranks number four in the country for new home starts set to break ground in 2016, trailing only Providence, Rhode Island, St. Louis, Missouri, and San Diego. New construction offers another option to homebuyers and helps equal out the supply and demand imbalance we’ve experienced.

7. Millenial home buying will boost demand

The largest single segment of the U.S. population is the Millenials, America’s 18-34 year olds, also called Gen Y. In the past few years, they’ve been reluctant to become first time home buyers, saddled with student loans and cautious after seeing their parents struggle mightily in the recent Recession. But as Millenials mature, enjoy increasing career stability and start families of their own, their demand for entry level, affordable housing will be high. Sacramento is no exception, as Millennials now make up about a third of the home buying market and roughly about 30 percent of the population in the region.

8. Rents are rising

Being a renter is more expensive than ever in the nation – and definitely in the Sacramento region. Already, we’ve seen a shortage of affordable single-family homes, apartments, condos, and other affordable housing options in the area, with monthly rents rising considerably. In 2015, we saw the first year that home ownership was only half as expensive as renting, as renters paid an average of 29.9% of their monthly income toward rent compared to an average of 15.3% for homeowners. Additionally, more renters than ever are paying at least 30% of their income towards housing expenses. Add it all up and 2016 will be even more expensive for Sacramento renters, creating a surge of demand for home buying and further stimulating the housing market.

9. The Baby Boomers are downsizing

The Baby Boomers, our 55-74 year old generation, will keep entering their golden years at an unprecedented rate. As they retire and face changes in their income, healthcare needs, and lifestyles, so too will their housing needs change. This year, many Boomers will look to sell their bigger, traditional homes and move into smaller, more manageable housing, including town homes, condos, shared housing, etc., a turnover will help reinvigorate Sacramento’s housing market.

10. Sacramento’s downtown revitalization is in full swing

If all of the other factors weren’t reason enough to feel sunny about Sacramento, don’t forget we have a brand new arena and state of the art entertainment complex not far from opening, triggering a massive revitalization of our downtown. A new arena means more jobs, new development projects, more investors, a reenergizing of consumer confidence and civic pride, and an undeniable ripple effect that will surely affect the already-strong housing market.