Sacramento rent is in an upward trend and it doesn't look like living cost in the Capitol City will simmer down any time soon.
A Yardi Matrix report found rent in Sacramento rose 10.5 percent through December, the highest year-over-year rent growth in the nation. It was also the only metro city to end with a double digit increase, more than double the 3.9 percent national average, according to the online apartment market data source.
Just how much does rent cost in Sacramento?
Yardi Matrix reports the average rent stood at $1,275 in December, marking it higher than the $1,210 national average.
Rent Jungle, an online search engine for rental housing, calculated rent in Sacramento for January 2017 at a slightly higher $1,346. The data also showed the average rent for housing back in January 2011 was $873 meaning rent prices went up $473 over a six-year period.
Additionally, Rent Jungle reports a one bedroom apartment in Sacramento cost $668 to rent in January 2011 and now costs $1,188 to rent. A two bedroom rental was $825 in January 2011 and spiked to $1,418 in January 2017.
Rent Jungle data shows rent prices in Sacramento really began to spike in 2015 and have increased significantly since then.
The most expensive neighborhood to rent in Sacramento is Midtown, which averages at $1,847, according to Rent Jungle. Campus Commons is close behind at $1,841. The Creekside neighborhood in Natomas follows as third most expensive at $1,825. Downtown ranks fourth costing a renter $1,732.
Higher costs for rentals in Sacramento is evident, but why is the city experiencing a boom in prices?
The main factor according to several rental market sources, including Yardi Matrix, is lack of new housing units.
Sacramento added 852 units in 2016, an expansion rate of 0.7 percent, according to Yardi Matrix. The completion rate is well below the national average and is not expected to pick up the pace. Only 1,600 units are underway in Sacramento.
Since construction is limited in the near future, occupancy is expected to reach 96.6 percent and rent is forecasted to rise another 9.6 percent in 2017.
Nearly two-thirds of all supply is being added to the Roseville/Rocklin area, as well as the Rosemont/South Rancho Cordova area. In fact, Yardi Matrix found rent grew by nearly 20 percent in 2016 in the Rancho Cordova and Arden Gardens/Arden Terrace neighborhoods.
The good news is there are 10,000 units in the planning stages, but no timeline on how quick or when they'll be ready.
Sacramento is the cheaper alternative to the Bay Area, according to Yardi Matrix. But Sacramento construction costs are similar to the Bay Area and is also known to have high barriers to development and a lengthy approval process for a new product, making it more difficult to build and meet demand in the area.
Sacramento is adding new units at a crawling pace compared to the job growth the region is undergoing.
The city added more than 24,000 jobs last year, up 2.6 percent which is above the national average. Sacramento has also seen investment value with the addition of the Golden 1 Center and new projects underway in the surrounding downtown area.
As more jobs appear, so do more people.
Sacramento's population has grown by 100,000 since 2011, according to the Yardi Matrix report. Between 2014 and 2015, the metro grew by 1.3 percent, well above the national average of 08 percent.
With more jobs, more people, slow construction and low vacancy, it's safe to say, landlords will likely continue to reap the benefits of high rent for some time to come.