California’s Golden Real Estate Opportunities Keep on Growing
California’s Central Valley has become one of the nation’s hottest housing markets, making Fresno one of the nation’s top housing markets to watch in 2022. Between 2021 and 2022, the region experienced a 19% price gain, raising the median home price to $495,000.
That rate of appreciation puts Fresno in the top 10 percent of all U.S. markets, according to data from NeighborhoodScout. Fresno is the place to buy if you’re looking for your next California investment property.
The increase in real estate values isn’t a flash in the pan, either. Fresno real estate has appreciated nearly 127% over the past 10 years. That’s an average annual rate of 9%.
The Fresno real estate market shows signs of strength across other key metrics, too.
- Homes spend an average of 8 days on the market (Redfin)
- Fresno has 1.9 months’ supply of inventory available (Norda Real Estate)
- Homes in Fresno sold for 1.48% above asking price in March 2022 (Realtor.com)
The Fresno housing market may be small in California terms, when compared to bigger markets like San Diego, but it’s still substantial. Fresno is home to more than half a million people, making it the fifth largest city in the state, and the area’s real estate market including the suburbs contains almost a million people.
The market growth seems poised to continue. Realtor.com forecasts Fresno will outpace the state’s other major metros in both sales (up 3.7%) and prices (up 5.9%).
Investors interested in California real estate investing will find many opportunities. Both short-term and long-term investors have found success in Fresno—but local knowledge of the market’s unique characteristics is key.
Fresno’s Diverse Economy
Fresno serves as the economic center for California’s Central Valley. Agriculture is the major industry for the local economy, providing about 25% of the region’s jobs.
There is more to the economy, though, than farming and food processing. The city is a regional services hub, resulting in many educational and medical jobs in the area. And the area’s manufacturing sector provides jobs in metal products, farm machinery, stone, transportation equipment, glass products, electrical equipment, wood products, and furniture.
And if the state ever finishes the bullet train to connect Fresno and San Francisco, real estate investors can expect the Fresno housing market to boom as the doors open for people to live in Fresno, which is much more affordable, while working in San Francisco’s high-paying tech sector.
Despite the number of industries represented in Fresno, the city’s unemployment rate is historically higher than most markets because of the seasonal employment needs of the agricultural industry. Currently, Fresno’s unemployment rate is 7.6%, which is higher than most markets, but notably lower than the area’s rate before the pandemic.
The Market Is Affordable, but Rent Continues to Increase
One of the first things real estate investors will notice is Fresno’s relative affordability. By California standards, Fresno’s housing market is a bargain.
Investors are likely to pay around $400,000 for a single-family home in Fresno. Comparatively, investors are likely to pay more than $1.5 million for a single-family home in San Francisco and more than $1 million in Los Angeles.
While Fresno’s housing market remains affordable, rents in the city have continued to increase. As other California cities saw rents plummet during the pandemic, Fresno stood out. Since 2017, average rent in Fresno has spiked by 39%. Over the past 12 months, rents have spiked a whopping 26%. The median rent for a one-bedroom apartment in Fresno is $1,141 and rent for a two-bedroom is $1,421.
Many Fresno locals attribute the surge to people seeking to escape the high cost of living in Los Angeles and the Bay Area.
Fresno’s Real Estate Market is Active
Fresno’s real estate market is quite active, which is a good sign for investors. Fresno is a convenient escape from San Francisco, leading investors to find marketable opportunities in both short-term and long-term rentals.
Because of the city’s agricultural base, many people living in Fresno are seasonal or temporary workers. This creates a great opportunity for real estate investors. These residents need housing, a need that can be met by short-term rentals.
Short-term rentals (STRs) through services like Airbnb can pay off for investors. Fresno is ranked seventh on Mashvisor’s list of best places for Airbnb rental income. Investors are seeing an average monthly revenue of $2,000 with an 80% occupancy rate from Fresno Airbnb properties.
Long-term investments like multifamily properties and single-family homes are also a great opportunity for investors. Fresno’s occupancy rate in multifamily properties is 98%—an incredibly high rate that indicates a dire need for more rentals.
Despite this need for multifamily housing, multifamily construction permits fell 45% between 2021 and 2022. That shouldn’t be a deterrent for investors, though. Because of the high occupancy, investors looking for real estate investment opportunities in Fresno, California have great options in value-add or stabilized multifamily properties.
Single-family home construction tells a different story. Fresno’s construction market screeched to a halt after the Great Recession, and it remains stalled. However, there are still opportunities. Single-family construction permits rose 17% between January 2021 and January 2022.
In December 2021, the Fresno City Council announced that 600 market-rate, single-family homes will be built in Fresno over the next 10 years. The 10-year agreement consists of developing 599 single-family homes and a two-acre neighborhood park.
Even with the rental housing shortage and the announcement of the 600-home community, developers aren’t as interested in building homes in the Fresno area because of the influx in the unemployment rate that stems from the variable farming economy that Fresno is built from. But investors looking at small build-to-rent projects may find opportunities, given the increasing rent environment and strong occupancy rates.
Investors Have Options in Fresno
Home appreciation is up in Fresno’s thriving real estate market, and investors have no shortage of options in California’s Central Valley. Investing in Fresno, CA can truly pay off for real estate investors.
If you’re considering a real estate investment in Fresno, California, there are multiple strategies to consider —build to rent homes, multifamily bridge financing, and short-term rental financing—and Lima One offers financing solutions to help investors no matter the strategy. We offer the nation’s premier suite of multifamily and rental loans, as well as some of the most competitive construction loans in California.
As experienced private lenders, we’re able to move quickly when you find the right opportunity, while providing you with the best options for an investment property loan in California. Our clients have different investment strategies, so we have designed our loan options to allow us to cater to their individualized needs. Contact us today to discuss your next deal, or if you have a deal in hand, speed up the process by applying now.