The 1031 first would make sense if you needed to reposition to make it more attractive for a refinance or move it to increase cash flow first or change sectors. 

Sacramento has remained very stable by comparison, I believe because we are a state capitol, two major universities, business and medical sectors are strong, growing population, and some more barriers to entry to scare off the stupid money. 

Only Self Storage/Industrial sector is better than residential direct investment and that's also very dynamic.

I invest here for the huge growth from recent additions to the tech sector (google, intel, amazon, honda, and many start ups)Plenty of options here for a 1031 exchange

Very savvy political leadership.The secured and pumped up the Military BasesEnticed Defense Contractors with cheap land and low taxesCut education/public sector wagesAllowed in cheap undocumented workers from Latin America. 

Lots of Apartments being built, but the homes subdivisions are favoring mid to large homes, ignoring the starter homes sector.  

I'd like to start out in the buy and flip sector and then use that capital to invest in rental properties as I go along.

In the manipulation of benchmarks such as the interbank borrowing rate these banks were essentially messing with the cost of borrowing of upwards of $450 trillion in loans and derivatives worldwide.

Will sectors of the real estate market be impacted by what's going on in the world?

You say diversification is important but your portfolio crams virtually all of your nest egg into the real estate sector.