Sacramento/Elk Grove Housing Crash

[Mike Esposito]

Just wanted to get a sense of what people are seeing in Sacramento and the immediate surround areas. What does everyone think will happen over the next 6-12 months? I am anticipating a softening market but I’d like to see if I’m being too negative. 

The reason I see around 5-10% drop by March 2021:

1. Increase in foreclosures after forbearance and unemployment money ends. 

2. Lack of business reopening due to extended COVID lockdowns.

3. Crime/poverty increases.

4. Decrease in rent prices in the Bay Area encouraging people to stay and causing slower growth in surrounding areas.
 

[Kyle Kinsley]

I think San Francisco/Oakland has a lot of tech related jobs. With covid allowing employees to work remotely and still get paid the same I think a lot of investors are probably thinking "I don't really want to find a new tenant during this COVID. Let's just sell it." Probably a reason for so many homes coming on the market. 

High paying employees that work in tech can now live in any part of the country and still get paid very similar than living in the Bay Area. I read an article the other day that Mountain View saw a DECREASE of 18% in rents since COVID started. It makes sense, rather than paying $4,000 a month for a 2 bedroom in Mountain View, why not move and save $2,000 a month. 

I can't speak on the Sacramento market because I don't follow it very closely but in Modesto area, rents are at an all time high. A 4 plex in Modesto in 2016 was probably selling for roughly 300k, in the past 6 months investment properties have skyrocketed. I see 4 plexs selling for 500k easy. 

I think there is a lot of 1st time investors that got into the market in the last 3 years and with rents so high the numbers make sense but I feel that once rents decrease they won't be cash flowing nearly as much and could potentially losing money every month. 

I think that the market will go down in 2021. I feel that once banks start foreclosing on homes and evictions are allowed to happen there will be a lot of homes both for rent and for sale. If interest rates increase, which I feel inevitable has to happen in the next 12-14 months, there will a natural decrease in sales prices. Once there are more homes on the market and rents decrease home values will go down. By how much, who knows! If I knew I might ask for a consulting fee LOL