Even though Sacramento California is the hotspot for the tech industry and home to some of the wealthiest individuals in the world, it still struggles with the housing market. However, its capital city Sacramento doesn’t seem to have the means to keep up with the surge in housing demands. 

Sadly, there are viable reasons why that is. The housing crisis has induced a sense of urgency for new developments, displaced renters, and homeowners alike. 

The pressure makes it difficult for everyone involved since not only do we need more workers to get all the work done, they also need to be either skilled or licensed to work within the industry. In some cases, there just aren’t enough people qualified to fill these open positions.  

There is also the issue with building supplies and materials, where the cost needs to be affordable while the supplies are still of the highest quality. Delivery times also play a significant role, where currently, many deliveries in this industry are backlogged due to the pandemic.   

Keep reading to find out how some of the most significant issues are fueling the housing crisis in Sacramento, California and what’s being done to bridge the gap so more people can find adequate housing.

Soaring House Prices vs. Earning Potential

Because supply isn’t meeting demand, the result is a surge in real estate prices. This development affects people in various ways, including sharing living spaces with other family members to avoid higher monthly costs. 

Often there isn’t enough money left over from paying rent each month after footing all the bills either. As a result, some residents struggle to make ends meet even when working multiple jobs or taking on a side gig for extra cash. 

In 2020, Sacramento’s housing construction was solid, but affordable housing shortages persist regardless. The city’s acting long-range planning manager, Matt Hertel, acknowledges the need for continuous growth in the city’s housing department.

Hertel was quoted stating that “We’ve made a lot of progress, but it’s critical that we maintain that momentum for both current and future residents in our city.” 

Suppose homebuyers and sellers in Sacramento want better solutions from now on. In that case, they must come together and try something different rather than continuing down this same path that has been relatively fruitless so far.

During his recent State of the City address, Mayor Darrell Steinberg plans to assist his city and the state as a whole in addressing the housing crisis. According to the Mayor, this includes a “right to housing” and the “obligation” for homeless people to accept shelter offered to them.

Furthermore, the Sacramento City Council passed a resolution, with no objections, which would begin creating more than 20 sites in eight city council districts to provide shelter for homeless people and families.

Finally, after almost five hours of meetings, discussions, and listening to public comments, Mayor Darrell Steinberg received the go-ahead for his $100 million site plan.

The Imbalance Between Supply and Demand

The housing market is a good illustration of how supply and demand operate in an industry. When the need for houses increases but the supply is limited, home prices are frequently increasing. 

Conversely, homeowners may decrease their pricing when there is a surplus of housing on the market due to less buyer interest. The imbalance between supply and demand in Sacramento housing has reached a critical level due to the lack of creative housing options for millennials, young families, low-income residents, and seniors. 

The Sacramento housing crisis is caused by significant demand and small supply as California’s income growth fails to keep up with the high living costs. As a result, wages for lower-income families have stagnated while home prices and rents continue to rise.

This has exacerbated the pressures on low-income Californians who spend more money than ever before on rent and can’t afford homeownership.

Building Supplies Cost on the Rise 

Timber and plywood costs have skyrocketed not just in California but throughout the entire United States. Since homebuilding can rise or fall considerably faster than sawmill capability, wood products prices vary more frequently than most goods.

In addition, wood products have additional steadier applications, such as non-residential construction, crates, and pallets. Still, new housing is the most common usage, followed by house repairs and renovations, which are on the rise. 

According to Ken Simonson, Chief Economist for the Associated General Contractors of America, steel and timber prices have increased significantly this fall, with price surges occurring several times. He also stated that increased demand from home builders and renovators could keep costs elevated. 

New Housing Approvals are Time-Consuming, Costly, and Challenging

Limitations to infill and greenfield development occur in a variety of ways. Minimum lot sizes are one of the most significant density restrictions for new single-family subdivisions. Still, they are less critical for infill projects, where property parcels already have well-defined limits.

It might be difficult to feel sorry for developers. However, since the dawn of time, it feels like they’ve been griping about rules and limitations, which they claim make it more challenging to create their projects. 

Additionally, most property developers and homebuilders cannot afford to finance their projects on their own entirely, so they seek financing from banks or other financial institutions for part of the development expenses. 

Therefore, banks, insurance companies, and other equity investors typically provide all the money for apartment purchases—a process easier said than done.

California Governor Gavin Newsom has signed legislation to relieve the state’s chronic housing shortage by increasing housing production and streamlining the home building approvals process.

According to the Governor’s office, “California will invest $1.75 billion in what the administration terms a new California Housing Accelerator. This will produce 6,500 low-income housing units which had previously been delayed due to a lack of tax-exempt bonds and low-income housing tax credits.”

Will House Prices Go Down in Sacramento?

As house prices continue to soar in California, Sacramento real estate has done the same. In fact, housing costs in Sacramento have been going up for so long that many people wonder whether house prices will ever go back down. 

While there is no definite answer to whether house prices will go down again, it seems more likely than not – even though only time will tell for sure. If you want more details about the housing market, contact us today for a free consultation.