January, 2008 - The poor conditions in the housing market will continue to weaken the economy in the Sacramento Metro into Q1 2008. The housing market is faced with numerous challenges that should increase demand for rental housing. In the tri-county area, nearly 5% of the owner-occupied housing stock is For Sale. Foreclosed properties and short-sales total 2.1% of the inventory.

Bank-owned properties, many short-sale properties, and .7% of the remaining inventory are vacant, effectively removing 2.8%, or 9200 homes from the housing supply. Under these circumstances, demand for rental housing should continue to strengthen. The large new and existing SFR inventory has put enormous downward pressure on prices, as demonstrated by a median SFR price drop of 15% Oct.-to-Oct.. Compounding this glut is the credit crunch, created entirely by the Federal Reserve. Source: California Association of Realtors /Metrolist MLS
Income Property Market
For 20 years, investors pushed prices well beyond traditional return-on-investment valuation model by using comparables to determine prices rather than traditional investment math. Income property sellers now find an entirely different valuation landscape. Investors focus on cash flow instead of appreciation to drive their investment decisions.
The small number of recent income property buyers are choosing properties with positive after-tax return with 25% down. Current income property inventory will require 24 months to absorb, if conditions remain the same. Among current income properties for sale, the median gross rent multiplier was 15.63. In contrast, properties that sold during the last six months had a median gross income multiplier of 14.58.