On Wednesday, our team attended the Sacramento Business Journal‘s highly anticipated Sacramento Economic Forecast event. The panel brought together top experts, including Shelley Schorer, CFO of CommonSpirit Health’s California Division; Will Austin, Director of Market Analytics at the CoStar Group; Chris Cady, Division President of Woodside Homes; and Joe Niehaus, Senior Vice President of The CUFS Group. The discussions provided invaluable insights into trends shaping the region’s economy and the broader national landscape.
Trends and Projections from the Sacramento Economic Forecast
Moderated by Dr. Sanjay Varshney, Chief Economist of the Sacramento Business Review, the panel shed light on key economic trends:
- Inflation and Interest Rates: Inflation is expected to continue to soften, with the panelists predicting additional interest rate cuts by the Fed. Mortgage rates, however, will likely remain elevated at 6-7%, posing challenges for housing affordability.
- Commercial Real Estate: Industrial vacancies are climbing, while office absorption is improving, driven by government tenants in the region. Retail space is undersupplied, signaling opportunities for expansion.
- Financial Institutions: Regional financial institutions are performing well, but access to credit and deposit growth remain challenges.
- State Budget: A potential surplus, buoyed by strong stock market performance, contrasts with looming fiscal pressures.
Housing Market Challenges
Chris Cady discussed the hurdles facing Sacramento’s housing market. Higher mortgage rates are pressuring affordability yet demand for new homes persists and is expected to continue. The resale market remains a strong competitor, with premiums for new builds hovering at 15-20% over existing homes. Additionally, rising insurance costs, particularly in high-risk areas, are exacerbating affordability concerns.
Healthcare Growth and Policy Impacts from the Sacramento Economic Forecast
Shelley Schorer highlighted the healthcare sector’s robust growth, with outpatient care driving job creation. However, federal policy changes to Medicaid and Medicare funding could introduce uncertainty. With 976 positions open at CommonSpirit Health and labor shortages remaining a critical issue, the sector faces significant operational challenges. The healthcare industry is expected to expand by 1.6 million jobs in the next eight years, with a strong emphasis on outpatient care and nurse practitioners.
AI and Labor Market Adaptation
Artificial intelligence was a recurring theme throughout the Sacramento Economic Forecast event. While AI may initially displace jobs, panelists were optimistic about long-term labor market adaptation. Drawing parallels to the internet boom of the 1990s, experts emphasized AI’s potential to create higher-skilled opportunities despite short-term disruptions.
Generational Shifts and Wealth Transfer
Millennials, who accounted for 45% of first-time homebuyers last year, demonstrate financial resilience amid economic uncertainty. The panel also highlighted the impending $35 trillion intergenerational wealth transfer, which is expected to reshape financial landscapes over the next three decades.
Key Takeaways from the Sacramento Economic Forecast
- Data-Driven Decisions: The Sacramento Business Review emphasized the importance of leveraging data to navigate economic challenges effectively.
- Policy and Innovation: Addressing housing affordability, labor shortages, and AI adaptation requires innovative policy solutions and proactive community involvement.
- Regional Collaboration: Retaining talent in Sacramento hinges on creating competitive opportunities and investing in education aligned with industry needs.
As the panel concluded, the importance of preparing for a rapidly evolving economic landscape and a new administration was clear. From housing and healthcare to AI and generational wealth, Sacramento stands at a crossroads. Our team continues to listen and analyze data to help identify indicators in larger markets to forecast the financial future of the greater Redding area.
