Report: Apartment Investment Expected to Slow in California's Capital

SACRAMENTO, CA-With sales prices way up and rent growth slowing, lower returns will put downward pressure on apartment investment activity over the next 12 months, according to the latest apartment market research report by Marcus & Millichap Real Estate Investment Brokerage Company.

The average rent in the Sacramento region increased 3.2% over the last 12 months and is forecast to reach $891 per month over the next year; however, concessions increased over the last year as well, and effective rents are currently 3.1% below asking rents, compared to 1.9% one year ago. New product coming online will boost the average rent over the next 12 months, but existing properties will have to compete, keeping a lid on rent growth.

Prices are not forecast to soften, according to the report, but appreciation will slow in 2003. Investors interested in the market or in need of 1031 exchange properties helped to generate an 11.4% increase in sale prices during the first half of 2003, according to the report, pushing up the median price per unit to $68,917. The sales climate will remain in sellers’ favor, according to the report, but owners who price properties aggressively are likely to experience much longer marketing.