Sacramento Multifamily Housing Market Mid-2025: In-Depth Analysis

Vacancy Trends

Sacramento’s apartment vacancy rate stands around 6.7% as of mid-2025 – markedly above the 10-year historical average (~4.9%). Over the past year, demand (net absorption) has roughly kept pace with new supply, leaving the overall vacancy rate essentially flat This equilibrium has persisted through the first quarter of 2025, preventing further vacancy escalation despite a wave of new deliveries. For context, last year saw demand reach a decade high (with 2,507 units absorbed over 12 months) before cooling slightly in early 2025. The recent stability in vacancy suggests that newly delivered units are, for the most part, finding renters at a pace similar to completions. Still, today’s 6.7% vacancy is elevated compared to Sacramento’s pre-2020 norm, reflecting the supply glut in upscale projects and lingering impacts of the pandemic-era construction boom.

Vacancy by Asset Class: Market conditions vary dramatically by asset class. Top-tier luxury properties (4 & 5 Star)are experiencing persistently high vacancies – currently about 11.8% vacant. This double-digit vacancy in the luxury segment is a direct consequence of the construction surge in high-end projects: a large share of new inventory over the past few years has been deluxe complexes with premium rents. Many of these properties are still leasing up, resulting in above-normal vacancy. By contrast, mid-market 3 Star apartment communities have a vacancy of roughly 5.7%, much closer to historical averages. Meanwhile, the most affordable workforce housing (1 & 2 Star) stock is only around 4.8%vacant – indicating relatively tight occupancy in older, lower-cost properties. In fact, vacancy in the lower-tier segment has declined for three consecutive quarters (through Q1 2025) as demand for affordable units rebounded post-pandemic. This recovery brought 1–2 Star vacancies back in line with 2015–2019 levels, after a period of pandemic-induced softening. In short, Sacramento’s vacancy pain is concentrated in the luxury class, while Class B and C communities are closer to full stabilization. The vacancy expansion in 3 Star properties that began in 2021 has largely subsided, and Class C vacancies are now essentially at normal trend levels, buoyed by steady demand and limited new supply in that segment.

Vacancy by Submarket: Geographic differences are pronounced, largely tracking where new development has been heaviest. The highest vacancies are observed in submarkets inundated with new deliveries or unique oversupply situations. For example, the Downtown Sacramento submarket – a hub of recent luxury development – is around 10.1%vacant. West Sacramento (across the river from downtown, where several large projects opened) is even higher at approximately 13.3% vacancyf. Another pocket of softness is Outlying Placer County, which includes fast-growing suburbs like Roseville/Rocklin’s outskirts – vacancy there is about 12.7% after a surge of new construction. The most extreme figure is the very small Outlying Sacramento County submarket, reporting 20%+ vacancy, though this is a niche submarket where one new project (157 units under construction, ~21% of local inventory) skews the numbersfile-jxhhxvosxkjma81tbksrlf. By contrast, many established suburban areas with little recent construction enjoy low vacancies. Woodland/Outlying Yolo County has the tightest market at roughly 3.9% vacancy. Other low-vacancy areas include Carmichael/Citrus Heights (~4.7%), Elk Grove (~4.8%), and Roseville/Rocklin (~4.9% – all under 5%. These submarkets have seen minimal new supply in the past year and strong tenant retention, keeping conditions snug. Broadly, demand has been highest in the urban core and inner-ring areas that also saw the most construction (North Natomas, Downtown, etc.), while more outlying or supply-constrained suburbs (Elk Grove, Folsom, Davis) hold some of the lowest vacancies in the region. This dynamic – urban core oversupply versus suburban undersupply – is a defining feature of Sacramento’s mid-2025 market.

Vacancy by Unit Type: The CoStar report also breaks down vacancy by bedroom mix, though these differences are less impactful than class or location. Generally, larger units (e.g. two- and three-bedroom apartments) in high-end projects have faced some leasing challenges, mirroring the overall luxury segment softness. Meanwhile, demand for more affordable unit types remains robust. Sacramento’s renter pool has grown notably among non-family households (often singles or roommates), which tend to rent smaller units: non-family households in the region increased 35% since 2013, outpacing total household growth. This suggests solid demand for studios and one-bedrooms, provided they are priced within reach. Indeed, many cost-conscious renters are doubling up or seeking affordable alternatives (such as regulated affordable housing) to reduce rent burden. The influx of new luxury studios and 1-bed units means those unit types may take longer to absorb in upscale buildings, but overall no segment is completely immune from the supply-demand balance. In summary, vacancy rates are highest in segments and areas that added the most expensive units, whereas moderately priced apartments – of any bedroom count – are enjoying healthier occupancy.

Rent Performance

Rent levels and recent growth: Market rents have essentially flattened over the past year under the weight of elevated vacancies and competition. As of Q2 2025, Sacramento’s average asking rent is about $1,866 per unit per month(approximately $2.20/SF)f. Effective rents (net of concessions) average slightly lower at around $1,848, indicating that landlords are giving some discounts (on the order of 1% off asking, on average) to attract or retain tenants. Year-over-year, asking rents have inched up a mere 0.4% – essentially a plateau in real terms. For context, rent growth peaked at 11.5% in 2021 during the post-lockdown surgefile-jxhhxvosxkjma81tbksrlf. But as new supply flooded in and the market cooled, rent growth decelerated sharply: the long-term average annual rent growth in Sacramento is ~3.2%, yet the market has been underperforming that benchmark since late 2022. In fact, in the five years from 2020 through 2024, cumulative rent growth was only about 20.5%, compared to a 31.7% cumulative increase in the five years before 2020. This illustrates how the once red-hot rent momentum has been tempered in recent years. As of mid-2025, effective rent growth is barely positive – roughly 0.5% year-over-year for the average unit– underscoring the impact of concessions and competitive leasing tactics on net rents.

Concessions and effective rents: One reason rents have stagnated is the widespread use of leasing concessions. Landlords, especially in lease-up properties, have prioritized occupancy over aggressive rent hikes. Roughly one-third of properties in Sacramento are now offering some form of concession (such as a free month or discounted move-in), a dramatic rise from the sub-10% share offering concessions in 2022. These giveaways have been “elevated through most of the past year", indicating persistent softness. As a result, effective rents (what tenants actually pay after concessions) have grown even more slowly than asking rents, and in some cases have declined. For example, in outlying areas that saw heavy new construction, effective rents dipped despite flat headline rents. CoStar data show that in submarkets like Folsom/Orangevale and West Sacramento – both of which saw an influx of new high-end units – asking rents fell ~1.4% in the past 12 months, and landlords additionally increased concessions, leading to outright effective rent declines around 1–2% over the year. Even where asking rents held steady, higher concession rates mean many tenants are paying less than they did a year ago. On the flip side, in supply-constrained areas with few concessions (e.g. older suburban complexes), effective rents have kept closer in line with asking rents. The bottom line is that rent growth has been essentially on pause – and for owners, any nominal rent increases have often been offset by the cost of incentives needed to fill unitsfile-jxhhxvosxkjma81tbksrlf.

Rent performance by segment and region: Rent trends vary by asset class and submarket. The luxury (4&5 Star) segment recorded about +0.6% rent growth in the past year – slightly better than the overall market but still extremely low. Upper-tier owners have struggled to push rents given the 11–12% vacancy in their buildings, relying instead on concessions to maintain occupancy. Mid-tier 3 Star rents were essentially flat (0% growth in asking, around –0.1% for effective rents YoY). The budget-friendly 1&2 Star segment saw modest rent gains (~+1.0% YoY as of Q2 2025), reflecting the solid demand and low vacancies in that class. Geographically, rent retreats have been most pronounced in submarkets with excess new supply. Downtown Sacramento and West Sacramento both saw rents retreat over the past 12 months (a slight decline through Q1 2025. Similarly, Folsom/Orangevale/Fair Oaks asking rents are down about 1.4% year-over-year, and Davis (home to UC Davis) saw rents drop roughly 1–2%, likely due to recent completions and perhaps fluctuation in student demand. In contrast, some suburbs without new supply managed small rent increases. For instance, El Dorado County saw asking rents rise ~2.1% in the past year – the fastest growth in the region – and Woodland/Outlying Yolo rents rose ~1.6% (effective rents up 2.0%). Other large suburban areas like Elk Grove, Roseville/Rocklin, and South Sacramento posted slight gains on the order of 0.5–1.6%. Broadly, urban core rents are stagnant or down a bit, while a few outer submarkets eked out inflation-beating growth. However, even the “strong” submarkets are only in the low-single-digit growth range – a far cry from the rapid rent increases seen a few years ago.

Outlook: With vacancy still elevated, landlords remain cautious about rent hikes in 2025, though there are signs of stabilization. CoStar forecasts rent growth will improve later in 2025 as demand stays steady and the construction pipeline slows. Indeed, the slowdown in new deliveries (discussed below) should reduce competitive pressure, and continued job and population growth will provide a base of demand. As vacancy gradually edges down toward ~6% (as projected), property owners may regain pricing power. That said, rent growth is not expected to return to the long-term average (~3% annually) until beyond 2025. In the near term, effective rent gains will likely remain modest and contingent on the burn-off of concessions. A meaningful re-acceleration of rent growth likely awaits a further tightening of vacancies and/or a pullback in inflation and interest rates (which would improve affordability). For now, Sacramento’s rent performance can be characterized as flat to mildly positive – a tenant-friendly environment compared to the steep increases of the late 2010s.

Construction Pipeline

After several years of robust development, Sacramento’s apartment construction pipeline is finally tapering, which could spell relief for the elevated vacancies and slow rent growth. Currently, about 2,100 units are under construction market-wide, equivalent to roughly 1.4% of existing inventory. This is a moderate pipeline by Sacramento standards – not negligible, but substantially down from peak levels seen recently. In 2024, developers delivered approximately 3,400 units, the most in any single year in the past decade. By contrast, only about 1,400 new units are scheduled to complete in 2025 This dramatic pullback in deliveries for 2025 (around 60% fewer completions than 2024) gives the market a chance to absorb last year’s glut. The lighter delivery schedule should allow many of 2024’s new projects to stabilize leasing and start whittling down the overall vacancy rate In fact, absorption in early 2025 has kept up with new supply, and with fewer openings in the back half of the year, vacancy is expected to gradually trend down toward the low-6% range in the near term.

Active development distribution: Importantly, the construction that is underway is highly concentrated in a few submarkets. According to CoStar, nearly 90% of units in the pipeline are located in or adjacent to Downtown Sacramento, North Sacramento/Natomas, and South Sacramentofile-jxhhxvosxkjma81tbksrlf. Downtown Sacramento alone has several projects in progress – it delivered 923 units over the past 12 months and still has another ~250 units under construction (about 1.6% of that submarket’s inventory). The North Sacramento/Natomas/North Highlands area (a growth corridor north of downtown) likewise delivered ~642 units in the past year and has roughly 591 units underway (2.6% of its inventory, the largest pipeline of any submarket)file-jxhhxvosxkjma81tbksrlf. South Sacramento (another area of focused development) accounts for a smaller share, with about 100 units under construction (0.5% of its inventory) after absorbing some new stock recently. Additionally, West Sacramento – which had a big 322-unit project delivered in 2024 – has about 366 units in progress (nearly 10% of its existing stock) across a couple of developments. Other submarkets are seeing little to no development. For example, suburban areas like Carmichael/Citrus Heights, Elk Grove, and Arden/Arcade currently have no multifamily projects under construction. Even high-demand suburban cities like Roseville/Rocklin have only one major project underway (around 397 units, ~3.4% of local inventory). This geographic split means future supply pressure will be very localized – the urban core and a few growth areas will bear the brunt of new deliveries, while most suburban markets face minimal new competition. Developers with projects in the pipeline, especially downtown and Natomas, should plan for continued lease-up headwinds as those areas absorb the pending supply.

Notable projects: The largest development currently is The A.J. in Downtown’s Railyards district, a 345-unit luxury community that recently completed in the first half of 2025. This project is part of a massive infill redevelopment (The Railyards) and sits adjacent to the planned new Kaiser hospital, symbolizing the long-term bet on downtown’s growth. Other significant undertakings include The Harper (a 397-unit project in West Roseville, started April 2025, targeting completion in 2026) and Ona (303 units in North Natomas, set to deliver by mid-2025). The pipeline also contains nearly 2,000 units of affordable housing developments (outside of market-rate counts), reflecting a push to expand regulated affordable inventory. This robust affordable pipeline indicates that even as market-rate builders slow down, nonprofit and subsidized developers are actively adding units to help meet the region’s affordability needs.

Construction trends and outlook: It’s worth noting that groundbreakings have pulled back sharply. In 2024, Sacramento saw the fewest new multifamily construction starts since 2016, as many developers became wary of potential oversupply and faced rising financing and construction costs. This development slowdown is a double-edged sword. In the short term, it’s reducing the risk of oversupply: the risk of a true glut has diminished thanks to strong leasing at existing projects and the cutback in new projects breaking ground. However, local economic development leaders caution that if the decline in starts persists for too long, Sacramento could swing to an undersupply scenario in the coming years The region already struggles with housing affordability, and too little new construction could exacerbate shortages, pushing vacancies down and rent growth back up quickly In essence, the market is seeking a equilibrium: after a period of over-building relative to demand, the pendulum is now swinging toward under-building. Many developers with long experience in Sacramento remain cautious – they have “pulled back on groundbreakings” in the face of slower rent growth and high costs. But given Sacramento’s ongoing economic and population expansion, few expect development to halt entirely. The consensus is that once the debt markets stabilize and interest rates ease, construction levels will normalize to meet the region’s needs. With strong job growth in fields like healthcare, biotech, and semiconductor manufacturing fueling household formation, Sacramento’s housing demand should stay on an upward trajectoryfile-jxhhxvosxkjma81tbksrlf. Overall, the current pipeline metrics suggest a healthier balance ahead: 2025’s lighter deliveries will allow absorption to catch up, and the next wave of projects is being metered out more cautiously. Real estate developers should use this window to position for the next cycle – keeping an eye on submarkets that may soon be undersupplied (as the recent pullback in starts could create opportunities by 2026–2027).

Sales and Cap Rates

Rising interest rates and pricing uncertainty have clearly taken a toll on investment activity in Sacramento’s multifamily sector. Transaction volume has fallen off dramatically from the peak seen in 2021–2022. In 2022, the market recorded approximately $1.6 billion in apartment sales across 138 deals – a banner year driven by low interest rates and aggressive investor demand. By 2023, however, sales volume plunged to only about $333 million (81 deals) as borrowing costs spiked and many would-be sellers held off. 2024 saw a mild uptick with $513.7 million transacted across 89 deals, but activity remained subdued relative to the pre-rate-hike era. Through the first half of 2025, momentum is modestly improving: roughly 50 apartment properties have sold year-to-date totaling about $431 million If that pace continues, 2025 could exceed 2024’s volume, but it’s still a far cry from the frenzy of a few years ago. In terms of turnover, only ~1.4% of Sacramento’s multifamily stock traded in the first part of 2025 Annual turnover in 2023–2024 hovered around 1.5–1.8% of inventory, whereas in 2021–2022 it was 4–5%. This indicates a much more illiquid market at present – fewer owners are selling, and those that do are transacting at lower price points.

The buyer pool has also shifted. Private local buyers have dominated recent transactions, accounting for nearly 90% of activity in the past 12 months. Institutional investors and larger private equity players largely stepped to the sidelines as the cost of capital rose. CoStar notes that “Sacramento is dominated by private buyers”, with private parties making up ~75% of acquisitions over the past five years, and an even higher share in the last year as institutional deals waned. This means many of the recent sales have been smaller, lower-dollar trades (often under $10 million), which is reflected in the reduced average deal size. In early 2025, the average sale price was around $8.8 million per transaction, down from over $11 million in 2022. Smaller assets and largely private-capital deals tend to transact at different cap rates and pricing metrics than large institutional-quality properties.

Cap rate expansion: The bid-ask spread between sellers and buyers remains a challenge. Owners often still quote cap rates in the 5.0%–5.5% range for their properties, but most buyers are underwriting deals at 6%+ cap rates to achieve required returns with today’s financing costs. This disconnect has limited deal flow, as evidenced by many would-be listings that did not trade. Nonetheless, actual closed deals show that cap rates have indeed risen. Over the past 12 months, the average cap rate for sold Sacramento apartment properties was about 5.9%, with the median around 5.7%. (By comparison, a few years ago cap rates in the high-4% range were common for multifamily.) Some distressed or value-add sales even hit cap rates in the high single digits – the highest recorded cap in recent comps was 11%, likely for a small property with issues. CoStar’s analytics estimate the market’s aggregate cap rate (for stabilized assets) at roughly 5.3% as of mid-2025, up from about 4.2% in 2021. This 20–100 basis point rise in yields(depending on asset class) has put downward pressure on property values. The market price per unit (a modeled value) is around $235k in 2025, down from nearly $260k in 2022 reflecting price declines. Actual sales over the past year averaged about $197,700 per unit across all asset classes, though this average masks a wide range by property quality.

Pricing by asset class: Sales trends differ starkly by asset class. The highest-quality 4 & 5 Star assets that did trade have still commanded premium pricing – for example, year-to-date 2025, 4–5 Star properties sold at an average of ~$280,000 per unit, with implied cap rates around 5.0%. However, there have been very few of these top-tier sales (only 4 major 4–5 Star deals in early 2025), as many institutional owners are holding assets unless pricing meets their expectations. In the 3 Star segment, more transactions are happening (11 sales YTD 2025) and at lower price points – averaging roughly $130,000 per unit with cap rates in the high-5% to 6% range. These are typically older garden-style complexes or smaller investor deals. Finally, 1 & 2 Star properties (often 1960s–70s vintage or small buildings) have seen the most trading (35 sales YTD) as they tend to be the least expensive assets. They averaged about $155,000 per unit sale price with cap rates around 5.7% on average. Notably, the cap rate spread between older class-C stock and newer class-A stock isn’t huge in Sacramento – partly because the older properties often have more upside potential (and sometimes more operational risk), while new luxury assets, though pricey, are trading at somewhat higher yields now to attract buyers. Overall pricing has softened for all categories, but the correction has been most pronounced in the luxury segment (which saw the biggest run-up in values previously and is most sensitive to interest rate changes).

Notable recent transactions: Despite the slowdown, a few significant sales closed in the past year, providing insight into pricing and buyer profiles:

• The Strand Apartments, West Sacramento: A 408-unit, 4-Star community built in 2022, sold in January 2025 for $126 million (approximately $309,000 per unit). The buyer was a partnership of The Bascom Group and Oaktree Capital Management – a notable institutional joint venture making a value play on a new lease-up asset. This was one of the largest single-property deals in Sacramento’s history (third-largest ever at time of sale). The property was reportedly ~11% vacant at sale, reflecting remaining lease-up; the buyers assumed $94 million in debt to finance the acquisition. This transaction shows that marquee assets can still trade, but require pricing that buyers perceive as a discount (cap rate likely around mid-5% for this deal).

• Artisan 8282, Elk Grove: A 264-unit garden apartment community (built in the late 2010s), sold in mid-2024 for $77 million ($292,000 per unit). The buyer was Weidner Apartment Homes, a private investment firm expanding its Sacramento footprint. This was Weidner’s third property in the market, and notably the first multifamily property sale in Elk Grove since 2021file-jxhhxvosxkjma81tbksrlf. Elk Grove is a high-demand suburban submarket with little turnover, so this sale was a rarity. The pricing ($77M) underscores that suburban assets with strong occupancy can still fetch near-peak valuations (Elk Grove has very low vacancy, ~4.8%file-jxhhxvosxkjma81tbksrlf). Weidner’s purchase signals continued interest in well-performing suburban assets despite broader market headwinds.

• The Vera at Fiddyment Ranch, Roseville: A 152-unit single-family rental (SFR) community (built as detached homes for rent) acquired in 2024 by PGIM for $65 million (a hefty $428,000 per unit). The Vera is one of the first purpose-built SFR communities in the Sacramento region and the first of its kind to sell on the investment market. The extremely high per-unit price reflects the large size and quality of the homes (far larger on average than typical apartments. This sale illustrates institutional confidence in the single-family rental model in suburban Sacramento. PGIM’s entry via Roseville also highlights the attractiveness of growth submarkets for alternative rental products. While $428k/unit is not representative of traditional multifamily, it shows investors will pay a premium for unique assets with strong tenant profiles (these were essentially new single-family homes leased as rentals).

These notable deals aside, most transactions in late 2024 and 2025 have been smaller complexes (often 50 units or less) trading among local private investors. Sacramento’s investment market sentiment is cautiously optimistic heading into late 2025 – brokers report that some buyer groups are re-engaging as interest rates stabilize, but high financing costs remain the main hurdle limiting deal velocity. Pricing expectations are still being recalibrated; many sellers have yet to fully adjust to the higher cap rate environment, but there’s hope that as the bid-ask gap narrows, volume will pick up. For developers and owners, the implication is that refinancing or selling is more challenging now: underwriting is conservative, and only truly well-located or value-add assets are garnering strong interest. Cap rates in the 5.5–6.5% range are the new normal for most deals, so project pro formas and exit strategies should be underwritten accordingly.

Submarket Differentiation

Sacramento’s multifamily market is far from monolithic – performance varies widely across its 15 defined submarkets, due to differences in supply additions, local demand drivers, and demographics. A clear pattern in mid-2025 is the contrast between the urban core (and other high-growth nodes) and the outlying suburban areas:

• Urban Core & High-Supply Submarkets (Downtown, North Natomas, West Sacramento): These areas have seen the bulk of new development and as a result are experiencing higher vacancies and more rent softness. Downtown Sacramento, which comprises the central business district and Midtown, has a vacancy around 10.1% – among the higher in the region. Over 900 units were delivered in Downtown in the past year, and it leads all submarkets in absorption (about 1,019 units absorbed in 12 months) as those new buildings lease up. Even so, supply has run slightly ahead of demand, hence the elevated vacancy. Downtown’s asking rents average about $1,808 per unit ($2.51/SF), which is the second-highest rent level among submarkets. However, rents actually declined ~0.9% in Downtown over the past year, and effective rents fell slightly more (~1.1% drop) due to increased concessions (Downtown has one of the highest concession rates at 1.8%). North Sacramento/Natomas/North Highlands, a large area north of the city that’s a hotspot for new garden-apartment complexes, shows similar trends: vacancy around 6.9% (above market average) with roughly 500 units absorbed in a year. Rents in Natomas ($1,925 avg ask) grew a modest 0.2–0.5% outperforming downtown slightly, but landlords still offer ~1.1% in concessions on average. West Sacramento – just across the river – stands out with vacancy at 13.3%, the highest of any major submarket. West Sacramento added a large 408-unit luxury property (The Strand) and others recently, totaling an 8.5% inventory expansion last year and has another ~9.7% of stock under construction. Consequently, West Sacramento’s rents have been sliding (–1.4% YoY in asking rents) and concessions are high (~2.1%, second only to Outlying Placer). In sum, areas that led the construction boom – Downtown, North Natomas, West Sac – are in a phase of absorbing units and competing for tenants, which is reflected in above-average vacancies, generous leasing incentives, and flat or falling rents in those submarkets.

• Stable/Suburban Submarkets (Arden/Arcade, Carmichael/Citrus Heights, Elk Grove, South Sacramento, etc.): Many of Sacramento’s suburban neighborhoods have seen little new supply recently and enjoy healthy occupancy and steady rent growth. For instance, Carmichael/Citrus Heights (in the northeast county) has one of the lowest vacancies at 4.7%. It had virtually no new deliveries in the past year, so supply-demand is balanced. Rents there average ~$1,664, and though growth was modest (+0.6% YoY), the submarket didn’t require concessions beyond ~0.6% on average. Elk Grove, a high-income suburb south of Sacramento, likewise has tight vacancy (~4.8%). No new multifamily supply has been added in Elk Grove in over a year (it’s primarily a single-family oriented city with high barriers to apartment development). As a result, Elk Grove’s rents (averaging ~$2,222, among the region’s highest) grew about 1.6% and are supported by very low turnover and high demand from families. Importantly, Elk Grove’s rent growth outpaced the market with virtually no concessions (0.6% concession rate) needed. Similarly, Arden/Arcade – a central area with older housing stock – has 5.1% vacancy (slightly below market) and saw asking rents rise ~1.4%. Arden had no new deliveries either, and only a minuscule 25 units under construction. These examples underscore that in supply-constrained submarkets, landlords have been able to maintain occupancy and even raise rents modestly, as they aren’t facing new competition. Other areas fitting this profile include South Sacramento (5.4% vacancy, +0.7% rent growth) and Woodland/Outlying Yolo (3.9% vacancy, +1.6% asking rent growth). Each has either zero or very few new units added, and demand has kept up with the existing stock.

• University and Peripheral Areas (Davis, Outlying Placer County, Outlying Sacramento County): A few submarkets have unique dynamics. Davis, home to UC Davis, commands the region’s highest rents (~$2,383 per unit, $2.56/SF) due to its student-driven demand and limited inventory. However, Davis saw rents decline about 1.1% (asking) to 2.0% (effective) in the past year. Its vacancy (6.4%) is a bit above market average, potentially due to some new student housing deliveries or fluctuating university enrollment patterns. Still, Davis remains a small, high-rent niche with low construction (no units under construction currently). Outlying Placer County (which covers fast-growing towns like Lincoln) had one of the biggest supply shocks relative to its size – it delivered 337 units in the past year, expanding local inventory by 9.4%. This pushed vacancy up to 12.7% and even with decent absorption, the submarket is temporarily oversupplied. Rents in Outlying Placer rose a modest 0.9% asking, but effective rents actually fell –0.7% as concessions averaging 2.4%(highest in region) were needed to fill new units. We expect vacancy there to ease as those projects lease up, but it’s a cautionary tale of rapid expansion in a smaller market. Finally, Outlying Sacramento County (a small aggregation of rural fringes) saw a peculiar scenario: it had no new market-rate deliveries but did record a negative absorption (net move-outs) of –127 units over 12 months, driving vacancy to 20%. This could be due to older properties losing tenants to newer options elsewhere or a statistical anomaly in a tiny inventory. In any case, its rents are the lowest in the region ($1,286) and flat year-over-year, reflecting a very price-sensitive tenant base.

Submarket rent and demand patterns: In summary, submarkets that experienced heavy development (Downtown, North Natomas, West Sacramento, Folsom, Outlying Placer) are in a period of higher vacancy and competitive leasing, which has kept rents flat or falling in those locales. Conversely, submarkets with little recent construction (Elk Grove, Carmichael, Arden, etc.) boast lower vacancies and have managed slight rent increases. Demand (as measured by absorption) generally correlates with supply injections: the highest absolute demand was recorded in areas where new units came on line (Downtown, Natomas, Folsom/Orangevale all absorbed 300+ units each over 12 months). Meanwhile, demand is naturally lower in places with no new supply (some even saw small negative absorption as renters migrated to new buildings elsewhere). For developers and investors, this means performance is increasingly hyper-local. It will be critical to underwrite deals with submarket nuance: for example, a project in Midtown/Downtown must account for a competitive leasing environment and likely offer concessions, whereas a project in a suburb like Elk Grove might achieve faster lease-up and rent growth but could face other barriers (e.g. entitlement hurdles, tenant affordability limits). The Sacramento market’s dispersion of outcomes – from soft urban core conditions to robust suburban metrics – provides opportunities and risks. Developers can target undersupplied pockets for new projects, but should be wary of adding to already saturated submarkets. Similarly, value-add investors might find better occupancy upside in core areas (betting on recovery) or opt for stable cash flow in suburban assets with consistently high occupancy. The current data clearly indicate which areas are overbuilt vs. underbuilt, guiding strategic decision-making across the region.

Economic and Demographic Context

Underpinning Sacramento’s real estate trends is a generally positive economic and demographic backdrop. The metro’s economy has been expanding, adding jobs and residents at a steady clip, which provides a solid foundation for multifamily demand. As of mid-2025, Sacramento’s total employment is about 1.11 million jobs. Year-over-year job growth is roughly 1.2%, in line with the national average. Crucially, the composition of growth is shifting in Sacramento’s favor: historically a government town (the State of California is a major employer, with government jobs making up 265k positions and growing ~1% YoY), Sacramento is now benefitting from growth in healthcare, life sciences, and advanced manufacturing sectors. For example, the UC Davis-led Aggie Square development – a large innovation campus – is projected to support 3,200 jobs annually when fully built out, contributing about $500 million in regional economic output each year. It will include life science labs, offices, housing, and community space, and its construction phase alone is creating over 12,100 construction-related jobs with a $1.9 billion economic impact. Recent announcements indicate companies like Cytiva and the Alice Waters Institute are moving into Aggie Square, signaling Sacramento’s emergence as a biotechnology hub. Additionally, several biotech and manufacturing firms have established facilities in the region in the past few years. This diversification is attracting a new wave of workers.

Demographic trends are equally encouraging. The Sacramento metro population is about 2.47 million and continues to grow ~0.8% annually. Importantly, much of this growth comes from positive net migration – Sacramento has been gaining residents from more expensive coastal markets. Bay Area and Southern California households are moving to Sacramento in search of affordable housing and a lower cost of livingfile-jxhhxvosxkjma81tbksrlf. The pandemic accelerated this trend, as remote work enabled people to relocate while keeping their big-city jobs. Even now, with hybrid work models, Sacramento remains attractive for those seeking California amenities at a fraction of Bay Area costs. This influx is not only boosting population counts but also shifting the income profile of the region. Median household income in Sacramento is about $100,669, which is well above the U.S. median (~$80,921). Local incomes grew 3.3% over the past year, outpacing the national income growth of 2.4%. Higher incomes, especially among the young professional cohort moving in, help support rents and absorption in the nicer apartment communities (explaining why 4–5 Star demand hasn’t completely collapsed despite affordability concerns). Indeed, CoStar notes that Sacramento’s value proposition – “comparatively low-cost option in a state with ample economic opportunity” – aligns with current renter preferences. The region offers a high quality of life and growing job opportunities, making it attractive to newcomers.

Another metric, the labor force, is expanding ~1.2% annually in Sacramento, indicating people are moving to or entering the job market here. Unemployment in the metro is around 4.8% as of mid-2025, which is slightly higher than the 4.1% U.S. average, but still relatively low and indicative of a healthy labor market. As employment grows and the labor market remains tight, housing demand is bolstered – new workers and households need places to live. It’s also worth noting that household formation in Sacramento is growing ~0.9% per year, a bit faster than population growth. This suggests more people are forming independent households (e.g. young adults leaving home, or people moving out of roommate situations), which increases apartment demand. As mentioned earlier, non-family households (often singles and couples without kids) grew 35% since 2013, a sign that Sacramento is attracting younger professionals and others who are prime renters.

That said, affordability remains a concern for lower-income renters. While Sacramento is cheaper than the Bay Area, rents have still risen substantially over the past decade (20% in the last five years alone). Some renters are feeling the squeeze – as evidenced by households “moving out of market-rate properties into regulated affordable housing” to reduce costs. The region’s housing stock, especially affordable units, is still not sufficient for demand. Sacramento’s housing undersupply is noted as a long-term issue, even if the short-term story is oversupply in the luxury segment. Essentially, there’s a tale of two markets: plenty of high-end apartments (some sitting vacant), but still not enough affordable/workforce housing to meet the needs of cost-burdened locals. Programs and incentives for affordable development (reflected in the 2,000 affordable units under construction) are aiming to address this.

In conclusion, Sacramento’s economic and demographic context is largely favorable for multifamily fundamentals. Job growth in diversified industries is bringing a steady flow of well-paid renters, and population gains from migration continue. These factors should help fill the new apartments over time and support rent growth – especially as the excess new supply is absorbed. The region remains one of California’s more affordable metro areas, which is a competitive advantage that draws people from pricier locales. For real estate developers, the key takeaway is that demand drivers (employment, population, income) are in place to sustain the apartment market; the current challenges with vacancies and rents are mostly a function of short-term supply indigestion and higher interest rates, not a fundamental demand shortfall. Sacramento is expected to remain an attractive market for renters and investors alike, provided that new development is aligned with the real pace of demand. With vacancy likely to ease toward 6% and rent growth gradually improving (albeit below historical averages in the near term), the outlook through 2025 and into 2026 is one of cautious optimism. Developers planning projects now have the advantage of recent data to guide them: focus on underserved submarkets, be mindful of delivering into competition in the core areas, and anticipate that by the time new projects come online in late 2026 or 2027, Sacramento’s affordability and economic vitality will mean a larger pool of renters ready to fill those units. In essence, the long-term fundamentals remain solid, even as the short-term requires navigating an uneven recovery.