VACANCY’S UPWARD CREEP CONTINUES; DEVELOPMENT LEVELS FINALLY CREEPING DOWNWARD
Multifamily vacancy in the Sacramento region stood at 6.4% as of the close of Q4 2025, up from the revised 6.3% reading of three months ago and the 6.2% rate posted a year ago. The market recorded positive net absorption to the tune of 362 units in Q4, down from the 401 units of occupancy growth posted last quarter. All told, over the course of 2025, the market absorbed 2,501 total units of inventory (supply), against 3,031 total new units delivered (supply). This sent vacancy up over the past year from the 6.2% rate of a year ago to the current level of 6.4%.
Developers added 21 new projects in 2025 (we only track properties of at least 25 units or more in our inventory) accounting for 3,031 new apartment units in 2025. Though down considerably from the 4,506 new units added in 2024, deliveries in 2025 still managed to slightly outpace demand.
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DEVELOPMENT COOLING AGAINST SOFTENING VACANCY AND RENT METRICS
Over the past 25 years, the market has averaged deliveries of 1,943 per year, but it is critical to note that the market has experienced some wild swings in development trends over the past 20 years. This period includes the post-Great Financial Crisis (GFC) years (2008 through 2016), when local multifamily development virtually disappeared and the market averaged only 500 new multifamily housing units per year with both multi- and single-family residential (SFR) at a near standstill during that time. It also includes periods of aggressive new development (the early 2000s and the early 2020s) when new construction proceeded at elevated levels.
Sacramento had been one of the hardest hit markets nationally in the GFC, thanks to a residential building boom that had been taking place since the late 1990s as local population surged thanks primarily to an influx of in-migration, primarily from neighboring San Francisco Bay Area residents looking for more affordable housing. But any residential market that was hot between 2005 and 2008 was hot at a time in which lenders were pushing the toxic loan product (I.E., adjustable rate, stated income
Sacramento Multifamily Market
Vacancy Vs. Deliveries (Supply) & Net Absorption (Demand)
Sacramento Multifamily Market: Vacancy/Average Asking Rent Per Unit
loans, etc.) that would eventually drive a near total global financial collapse. Those markets became ground zero for foreclosures, with local foreclosures estimated to have surpassed more than 30,000 in the aftermath of the GFC, or roughly 6% of the region’s single-family residential (SFR) stock. Most of these properties initially became rentals. Meanwhile, rent growth turned negative (the market remained in the red from 2008 through 201) and new housing development in the region ground to a halt. Most of those SFR rentals would eventually transition back to private ownership, but this shadow inventory of rentals kept local housing development constrained for years.
By 2017, after nearly a decade with no new multifamily construction, vacancy in the Sacramento market had fallen to a record low of just 3.4%. With rental rate growth surging, developers finally returned to the fold. New multifamily would increase over the next eight consecutive years (2017-2024) until peaking in 2024 with the delivery of 4,506 new units. Despite falling to 3,031 new units in 2025, deliveries still outpaced demand for the fourth consecutive year in a row. Though an uptick in vacancy from 6.2% to 6.4% over the past year reflects a modest uptick, the reality is that local vacancy has increased or remained flat in 14 of the past 16 quarters. For most of the past four years, deliveries have modestly outpaced net absorption, though the upticks in vacancy have rarely surpassed 20 basis points. But this slow moving trend has seen local vacancy creep from 3.5% as of the end of 2021 to the current rate of 6.4%.
But if vacancy has been slowly creeping upwards for the past four years, development levels are only now starting to head downward.
As stated previously, 2025 saw the addition of 3,031 new multifamily units, compared to 2025’s 4,506. Entering 2026 we were aware of 17 projects under construction across the region accounting for a total of 2,211 new units, most of which will be delivered in the coming year. We have no doubt that there will be additional projects currently in the proposal stage that will move forward in 2026 (with delivery dates either later in the year or in 2027), but development levels will likely decrease on the year.
A slowdown in deliveries should bode well for both local vacancy and for rental rate growth. The current overall average asking rent in the Sacramento region is $1,805 per unit. This number is down slightly from the $1,808 rate of one year ago. While this decline is modest and still within the statistical margin of error, we see softening across multiple markets. Eight of the market’s 12 distinct submarkets posted negative rent growth in Q4 2025. While none recorded a decline greater than -2.4% (West Sacramento), this supports what we are hearing anecdotally. Landlords are offering greater concessions like discounted move-ins (typically cheaper security deposits), free or discounted parking, additional storage, or other amenities and—in some instances—free rent. Costar reports that concessions during Q4 were employed at nearly double the rate as last year with landlords in new properties using them to gain new tenants and owners of stabilized properties offering them on renewals to keep households in place (renewals are still where we are seeing the greatest incidences of free rent being offered).
Across the region, this trend appears to be playing out for both Class A and Class B projects. The current average asking rent for Class
Sacramento Multifamily Market
Avg. Asking Rent Per Unit Vs. Annual Rental Rate Growth Q4 2025
A properties of $2,270 per units is down 1.0% from last year’s reading of $2,293 per month. The average asking rent for Class B complexes is $1,912, down from $1,921 per month.
It is critical to note that the overall decline in asking rents has been negligible to date. But keep in mind that the last time the Sacramento multifamily market recorded any negative rental rate growth was 16 years ago in Q4 2010, at the tail end of the GFC. Incidentally, the vacancy rate at that time was 6.3%--lower than the current 6.4% reading.
We see the current weakness in rental rate growth as a reflection of two concurrent trends. The first is a cash-strapped consumer that has been straining under the weight of higher prices since the Biden-era inflation spike. The price of groceries, for example, are up 29% today from where they stood in early 2021. The Federal Reserve estimates that overall prices are up 20% to 25% from where they stood five years ago. But rents also climbed aggressively during this period. Today’s average asking rent of $1,805 per unit is up 15.4% from where it stood exactly five years ago.
Heading deeper into 2026, inflation remains a bit of a question mark. Prices have been slowly rising over the course of 2025, but not to the degree many economists initially feared upon the April 2025 announcement of the Trump tariffs. Most US trading partners did not retaliate with their own tariffs, which has helped keep prices contained. Meanwhile, most of the administration’s tariffs were initially paused and not enacted until September 2025. Against that backdrop, JP Morgan is now predicting inflation to peak in the first half of 2026 and to drop over the final half of the year, though heightened geopolitical tensions could set off another round of trade wars.
Should inflation tick up significantly in 2026, landlords will face even greater headwinds on rental rate increases. However, a decreased development pipeline and vacancy moving in the
opposite direction would certainly improve the outlook for the year ahead.
LOOKING AHEAD
The market is on track to add roughly 3,000 new units this year. This marks a significant drop from the 4,361 apartments added in 2024, but the development pipeline remains relatively robust. We are currently tracking 19 projects accounting for 2,617 new units that are under construction with deliveries scheduled through Q2 2027.
The final quarter of 2025 will see some major projects coming to market including Greystar’s 269-unit Grove at Woodland and Blue Mountain Enterprises’ 160-unit Medley Apartments (both in the Natomas/North Sacramento submarket), Woodbridge Pacific Group’s 157-unit Tricon Elk Grove, and EAH’s 140-unit On Broadway Downtown.
Leading trade areas for development in 2026 include Downtown (729 units under construction), South Sacramento (492), West Sacramento (432), Natomas/North Sacramento (429), Roseville/ Rocklin (359), and the Arden Arcade (176). Meanwhile, we are tracking 70 proposed projects across the region with many of these likely to go forward in the months to come.
Among the new projects in the works are Birchway Elk Grove, a 276unit market-rate project that began construction in September. The developer, Greystar, has been particularly active lately. In addition to the Grove at Woodland project they will complete in October 2025, they recently received approval from the Sacramento City Council to move forward on their planned 378-unit Birchway Natomas project in that submarket. Other developments we expect to go forward include St. Anton Communities planned 168-unit affordable housing project Placer Creek—which would be the Placer Vineyards first affordable housing project.
But while we anticipate a steady construction pipeline heading into 2026 and beyond, we doubt that we will see a return to the aggressive levels of development the market experienced in 2023 and 2024. Sacramento continues to benefit from in-migration, primarily from Bay Area residents looking for greater affordability. While the population of California returned to growth mode in 2023, that masks a larger trend at play within the Golden State. Los Angeles and major Bay Area cities continue to see outmigration, with most of those residents heading inland for cheaper housing. Sacramento remains among the fastest growing large cities in California. Among medium-sized cities (30,000 people or more), Folsom and Rancho Cordova were the fourth and fifth fastest growing in 2024, with respective growth rates of 4.0% and 3.2%. That trend of Bay Area in-migration appears to be slowing, but so too is the region’s development pipeline.
Against that backdrop, we think rental demand for multifamily product will hold steady heading in 2026. Based on current levels of planned development that should translate into vacancy continuing to hover in the low 6.0% range. That said, it may be a challenging environment for rental rate growth.
