Sacramento Attracts More Residents

This week, Governor Gavin Newsom extended the eviction moratorium for corona virus effected commercial tenants through March 2021. This is good news for small businesses that are doing their best to make it through the current covid-19 caused environment. Governor Newsom’s order said that the goal is to offer stability to commercial tenants so that they could make business decisions based on worker and customer health instead of concerns about making rent. The governor feels that this is key to stemming the financial impacts of the pandemic. Since March 1st, Yelp’s Economic Impact Report finds that over 39,000 California businesses have closed due to the pandemic, and an estimated 19,200 of them have closed permanently.

While commercial real estate has a troubled outlook ahead, the residential real estate market continues to be strong thanks in large part to a lack of available inventory. There are multiple theories as to the cause of the historically low number of homes for sale which range from fear and hassle caused by the pandemic, to low interest rates allowing people to keep their home as a rental when moving to a larger place. The result of these contributing factors is that the current inventory levels are down significantly in comparison to last year. Area appraiser and Sacramento based expert, Ryan Lundquist, tweeted out this morning that our region has only 2,100 available listings for sale - that represents a 53% drop in inventory from a year ago today.

Another item of interest for our market and property values is a report from LinkedIn. Their research found that Sacramento has experienced a 7.6% gain in net arrivals between April and August of this year. That number is high enough to rank us #3 in the country, placing just behind Jacksonville and Salt Lake City, and just ahead of Milwaukee and Kansas City.

When we combine these contributing factors that more people are moving into our area than are moving out, with less home owners are putting their houses up for sale than had a year ago, and then sprinkle in the incredibly low interest rates that mortgages are at, then it is easy to see how and why home values continue to increase at a significant rate. With so much going on, it is difficult to predict where the market will be in 12 months. Current factors indicate a continued increase in home values. What could change that? Small businesses having to permanently close in large numbers. Interest rates beginning to go up. Delays in a vaccine for the corona virus that could extend the current situation deep into 2021. Or unemployment rates remaining high for the foreseeable future. But what if Sacramento is experiencing a historic adjustment in property values across the board and the region becomes the next California metropolis with high priced homes like we see in the Bay Area and in Southern California? What are the pros and cons of that scenario?