What is the Fresno market like?

Question

I live in San Diego. I've been looking for markets in CA that are more affordable and still in fairly high demand. How's the Fresno market? I'd love to hear from folks who are familiar with the area and/or who invest in the area.

Tell me all the things!

Mike Paolucci · Answer

As someone who grew up in CA, the numbers and landlord laws just didn't make a lot of sense to me. Same has been the case for a lot of buddies I grew up with that have started investing in the Ohio markets.

I ended up investing out of state and haven't looked back. Not only because of the lower entry points, appreciation and positive cashflow from day one, but more because of the landlord friendly laws.

Good luck on your property search!
Happy to connect about OOS investing experiences.

Nadeem Alamgir · Answer

Hey Jordan! Have you considered outside of CA?

Nick Maugeri · Answer

Hi Jordan, I would encourage exploring markets like Merced as well but it depends on your strategy. This was a general question, so I will put a general summary below from Costar. If you want to talk insights on specific markets and strategies therein, let's connect!

Fresno is near the geographic center of California, making it approximately 300 miles from Sacramento, Los Angeles, and San Francisco. The market enjoys its position as one of the least expensive markets in California, with a minimum population of 1 million people. As a result, the Fresno multifamily market remains on solid footing despite slowing demand figures.

Recently, the vacancy rate has increased to 4.1% over the past year but remains far below the national figure of 7.6%. The local increase comes from new inventory hitting the market. Fresno was starved for inventory for some time, and new inventory has generally been matched with a corresponding uptick in net absorption. Over the past year, 390 have come to market with net absorption reaching 150 units. While that is one of the lowest annual figures of the past decade, it is concentrated in the fourth quarter as demand struggled through the first three quarters of 2023.

Construction remains a prominent market theme but has moderated recently. There are 700 units under construction at present. Properties have recently been slow to break ground with higher financing costs, persistently high construction costs, and slowing demand. No new properties have broken ground since 23Q1.

Ongoing development, coupled with the lack of renter demand in the first part of the year, has led to slow rent growth. Rents are up by only 2.7% year over year, down from the high of 12.3% set in 21Q3. At the same time, concessions are on the rise, with some properties offering one month or more of free rent on a 12-month lease, putting downward pressure on effective rents, despite increasing asking rents.

Sales activity has slowed drastically in recent months, totaling only $79.2 million over the past 12 months from just 27 deals, well short of the five-year historical average of $191 million. Activity has been slow since 22Q2, when interest rates were significantly lower. Properties rated 1 & 2 Star account for the largest proportion of sales, with $62.3 million. Investment activity has been impacted by higher interest rates, poor demand, and slow rent growth as would-be investors seek a significant discount compared to peak pricing set in early 2022.

Jeff Zimmerman · Answer

what's up Jordan, Fresno has been a pretty good market for me.  I've had properties here since 2011.  Covid pushed rents crazy high everywhere and Fresno was no exception, excluding 2020 and 2021,  my rents are still up on average about 8% year over year from 2018 (much higher if you include covid).  We are dealing with a big housing shortage in Fresno and it doesn't seem to be ending soon due to the fact that the city of Fresno is not able to annex much more area from the county to build on.  The city of Clovis is still able to annex so there is more building in Clovis but not nearly fast enough.  Until we can level out rents, rents and property values should be climbing pretty quickly. All that to say, the Fresno market has been really good and should be good from that standpoint.  If you have any specific questions on the market feel free to ask and I'll do my best to answer or point you in the right direction.  Good luck!

Travis Beck · Answer

Jordan, Fresno market in my opinion is a great blend of affordable with opportunity still for appreciation and cash flow. Would love to go deeper if your interested

What is the Fresno market like?

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