Our industry specialist has reviewed and approved the final article. Also, some of the data presented here have been integrated into the Sacramento real estate spreadsheet template.
Thinking of buying in Sacramento? Get our financial spreadsheet tailored to this specific market.
Are you a renter worried about rising costs, or an investor eyeing Sacramento’s rental market?
Either way, 2025 is set to shake things up with higher rents and shifting dynamics.
Here’s what you need to know to stay ahead.
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.
1) Sacramento's average rent has actually increased by 2.5% from last year
As of November 2024, Sacramento's average rent is $1,546 per month, a 2.5% increase from last year, indicating growing housing demand.
The city's appeal and proximity to major Californian cities attract new residents and businesses, pressuring the housing market.
This trend, driven by a strong economy, limited housing supply, and population growth, suggests rents will continue rising into 2025.
Renters should anticipate further increases and plan accordingly.
Source: Apartments
- Why does Sacramento offer great opportunities for real estate investment in 2025?
2) Sacramento absorbed 657 rental units, a 90.4% increase from the previous year, indicating strong demand
In Q1 2024, Sacramento's rental market absorbed 657 units, a 90.4% increase from 2023, indicating strong demand.
This trend suggests Sacramento's growing appeal, with more people renting, leading to intensified competition and likely rent increases.
As demand outpaces supply, property owners can raise rents.
Rapid unit absorption shows that new properties are quickly rented, pointing to higher future rental costs.
If considering renting in Sacramento, acting soon is advisable.
Source: Kidder
3) CoStar Group predicts rent prices will rise in 2025 and 2026
CoStar Group predicts rent prices will rise in 2025 and 2026 as new apartment supply is absorbed, reversing the recent trend of lower rents.
As new apartments fill, the reduced surplus allows landlords to increase rents due to strong housing demand.
In Sacramento, growing population and demand are expected to outpace apartment supply, leading to higher rents.
Renters should prepare for this upward trend as the market adjusts.
Source: Rental Housing Journal
4) U.S. building permits for housing units fell 8.8% and less inventory usually leads to rent hikes
In March 2024, the U.S. Census Bureau reported that building permits for privately-owned housing units were at an annual rate of 1,458,000, an 8.8% decrease from March 2023's 1,598,000.
This decline, especially in multifamily housing, indicates a slowdown in new rental unit construction, affecting housing supply.
Fewer new rentals increase competition and drive up prices, particularly in high-demand areas like Sacramento, where population growth continues.
Consequently, Sacramento's rent prices are expected to rise in 2025 as demand outpaces supply, making housing data crucial for predicting rental market trends.
Sources: U.S. Census Bureau, U.S. News Real Estate
5) The vacancy rate in Sacramento is very low (4.2%), so it's hard to find a place to rent
The vacancy rate in Sacramento was 4.2% in Q4 2023, indicating a tight rental market as rates below 5% suggest limited availability.
This low rate means demand exceeds supply, allowing landlords to raise rents due to increased competition among renters.
If the vacancy rate stays low, rent prices are likely to rise by 2025 unless new rental construction increases or demand decreases.
Renters should plan, and policymakers should address the housing supply shortage.
Source: MM Properties
- Here's why starting an Airbnb in Sacramento in 2025 is a good idea
6) The Consumer Price Index rose by 2.6%, leading to increased costs and rent hikes in Sacramento
The Consumer Price Index (CPI) for All Urban Consumers rose by 2.6% over the 12 months ending in October 2024, indicating rising inflation.
In Sacramento, California, this inflation leads to higher costs for landlords, who often pass these onto tenants through rent increases.
Inflation also raises interest rates, increasing mortgage costs for property owners, which are also transferred to renters.
With high housing demand and limited supply in Sacramento, rent prices are expected to continue rising in 2025.
Source: Bureau of Labor Statistics
7) The average mortgage rate in the U.S. is 6.78%, making homeownership less affordable
As of November 2024, the average 30-year fixed mortgage rate in the U.S. is about 6.78%, with Sacramento, California, at 6.756%.
These rates have decreased slightly from last week and notably from 7.50% a year ago but remain high.
Elevated rates increase monthly payments, reducing home affordability and pushing more people to rent, raising rental demand and prices.
High rates also slow new home construction due to higher financing costs, limiting housing supply and further boosting rental demand and prices.
Real estate investors may hesitate to buy new properties, reducing rental supply and increasing rents.
Consequently, Sacramento's rent prices are expected to rise in 2025 as homebuyer affordability drops, rental demand grows, housing supply remains limited, and investor caution persists.
Renters should plan for potential rent increases.
Sources: YCharts, NerdWallet
- No, home prices in Sacramento will not fall in 2025
Get our spreadsheet tailored to Sacramento!
Our tool covers everything: NOI, COC, Cap Rate, Gross Yield, Net Yield, LTV, ROI, and numerous other metrics and charts.
So, will rents in Sacramento go up in 2025? Absolutely
Rents in Sacramento are set to rise in 2025, and here's why.
First, the average rent in Sacramento is $1,546 per month, which is a 2.5% increase from last year. This shows a clear trend of growing housing demand. The city's appeal to new residents and businesses is a major factor, driven by a strong economy and a rising population. As demand continues to outpace supply, rents are expected to keep climbing.
Additionally, Sacramento absorbed 657 rental units in Q1 2024, marking a 90.4% increase from the previous year. This indicates strong demand, and as new units are quickly rented, landlords are likely to adjust rates upward. The CoStar Group also predicts rent prices will rise in 2025 and 2026 as new apartment supply is absorbed, reversing recent trends.
Moreover, the U.S. Census Bureau reported an 8.8% decrease in building permits for housing units, signaling a slowdown in new rental unit construction. This means existing stock must meet growing demand, increasing competition and rental prices. The vacancy rate in Sacramento is 4.2%, indicating limited availability and potential rent increases.
Finally, the Consumer Price Index rose by 2.6% over 12 months, leading to increased costs and rent hikes. With the average 30-year fixed mortgage rate at 6.78%, homeownership becomes less affordable, boosting rental demand. All these factors combined point to a clear rise in Sacramento's rent prices in 2025.