I just closed several in 95816 -- a 3 bedroom at $225,000 that needed work, and a 2-bedroom that was practically falling down for $250,000.
If you're willing to look on the other side of Broadway, for example, in Land Park or Curtis Park, you will also find a few homes for sale that are under $300K, but most of these are 2 bedrooms, 1 baths and about 1,000 square feet, about the same configuration as you'll find in downtown / Midtown.
Another area to consider is Elmhurst in East Sacramento. Your best bet is to hook up with an active area specialist who can keep an eye out for you and notify you of homes before they come on the market. Trying to find a home like this on your own can be very frustrating, as you probably are already well aware.
If location is paramount, you might also consider townhomes and condos. Another client bought a condo in River Plaza, a 3 bedroom, 2 bath for $198,000, which was an unheard of price -- but it was a probate. The dues over there are around $500 a month because the association is updating the complex, but there are other condos / townhomes for sale that have much lower HOA dues.
It doesn't have to be grim. Diligence is paramount. Looking passively in this market and in your price range would be discouraging. Good buys are recognized and move quickly. If you prefer to look on your own (which sounds like what you are comfortable with), ask a Realtor to put you on an "auto-prospecting" with Metrolist. Any Realtor that works this area is able to do this, and in hoping you would end up working with them, will do it with no strings attached. This will automatically send you daily updates of new listings that fit the parameters you give. In this way, you will know of any property that comes on the market so you won't feel like you have missed anything. Also, to be safe, if you haven't already, you should speak with a lender to be certain of the price range you want to be in and can qualify for. This way you won't be disappointed if you find a property only to learn you can't qualify for a loan.
Still homes have come up, that need minimal updating and might be of consideration. In addition, in the last year, interest rates have dropped such that you might have more buying power than you know. The key is to focus on monthly budget amount, which would lead to the affordable purchase price.
Maybe it's time to look a little more closely? Go see some of the houses that you'd been passively looking at and to come up with a strategy.
Susan's right. Prices in that area haven't dropped as much, however, I recently sold a darling cottage type to a young couple who both worked at the Capitol and wanted the ability to walk to work. There were a lot on the market, and while it's true, some had older electrical and plumbing, so were also updated in those areas and really well-cared for.
The truth of the matter is that no one can say for sure what prices, interest rates or loan qualifications will do in the next year. However, after 20 years in the real estate industry, I feel confident that with good credit and/or funds to put down, most anyone can find away to get into a home.
The best thing for you to do is to start receiving emails of current homes that fit your criteria. This will keep you up to date in the kinds of properties that meet your needs and the prices they are going for. You can watch for trends this way. Then, a few months before you are ready, meeting with a reputable lender will be key---you could even do that now if you are uncertain as to your price-range.
Let me know if I can be of service and have a great weekend!
Good luck in your home search and don't get discouraged.