Monthly cost to rent a home vs monthly cost to buy a home in Sacramento...

Last year around this time I wrote a post detailing the monthly mortgage payments vs. average rent payments in certain neighborhoods in Sacramento, and I thought I would start 2012 with a similar post, updated with today's interest rates, average Sacramento home prices, and average rents.

Today was the first business day of 2012, and my phone rang off the hook. Who was calling me? Prospective home buyers who finally have decided that now is the time to buy a home in Sacramento. It seems that the overall sentiment among them is that it has become more affordable to buy a home in Sacramento than rent a home. Or in a similar vein, because renting is more expensive than owning -- some calls are from investors looking for cashflowing income properties. In many areas and under many circumstances, I believe this to be true. Prices are slightly down from last year, while rents seem to have increased. If you don't believe me -- just compare this data to a similar post from around this time last year.

When you take into consideration the average home price and probable monthly mortgage payment in particular Sacramento neighborhoods vs. the average rent, often times the mortgage payment is less. Let's take a look at a few different areas...just for the sake of citing my information sources, for average home price (used to calculate mortgage payment scenarios) I am using most recent November 2011 Trendgraphix data (December's data is not available yet, and I don't expect a huge variance) which is taken directly from MLS, and for average rent I am using the most recent Q4 2011 Homepointe Quarterly Residential Rental Survey. For my mortgage payment calculations, I am basing it on a 4.25% interest rate (which is actually slightly above today's average market interest rates), and including the full PITI - loan principle, interest, monthly property taxes, and monthly homeowner's insurance (and mortgage insurance where applicable).

Natomas - 95833, 95834, 95835
Average single family home sale price: $194,000
Average rent for a 3 bedroom home: $1,422
30-Year Fixed VA Loan (Zero downpayment): $1,226
30-Year Fixed FHA Loan (3.5% downpayment): $1,368
30-Year Fixed Conventional Loan (10% downpayment): $1,208
30-Year Fixed Conventional Loan (20% downpayment): $1,022

Elk Grove / Laguna - 95757, 95758
Average single family home sale price: $213,000
Average rent for a 3 bedroom home: $1,384
30-Year Fixed VA Loan (Zero downpayment): $1,346
30-Year Fixed FHA Loan (3.5% downpayment): $1,502
30-Year Fixed Conventional Loan (10% downpayment): $1,326
30-Year Fixed Conventional Loan (20% downpayment): $1,122

Rosemont / College Greens - 95826, 95827
Average single family home sale price: $154,000
Average rent for a 3 bedroom home: $1,194
30-Year Fixed VA Loan (Zero downpayment): $974
30-Year Fixed FHA Loan (3.5% downpayment): $1,086
30-Year Fixed Conventional Loan (10% downpayment): $959
30-Year Fixed Conventional Loan (20% downpayment): $811

Arden - 95821, 95825, 95864
Average single family home sale price: $250,000
Average rent for a 3 bedroom home: $1,466
30-Year Fixed VA Loan (Zero downpayment): $1,580
30-Year Fixed FHA Loan (3.5% downpayment): $1,763
30-Year Fixed Conventional Loan (10% downpayment): $1,556
30-Year Fixed Conventional Loan (20% downpayment): $1,317

Carmichael, Fair Oaks - 95608, 95628
Average single family home sale price: $236,000
Average rent for a 3 bedroom home: $1,370
30-Year Fixed VA Loan (Zero downpayment): $1,492
30-Year Fixed FHA Loan (3.5% downpayment): $1,664
30-Year Fixed Conventional Loan (10% downpayment): $1,469
30-Year Fixed Conventional Loan (20% downpayment): $1,243

Citrus Heights, Orangevale - 95610, 95621, 95662
Average single family home sale price: $164,000
Average rent for a 3 bedroom home: $1,300
30-Year Fixed VA Loan (Zero downpayment): $1,036
30-Year Fixed FHA Loan (3.5% downpayment): $1,157
30-Year Fixed Conventional Loan (10% downpayment): $1,021
30-Year Fixed Conventional Loan (20% downpayment): $864

South Land Park, Pocket / Greenhaven - 95822, 95831
Average single family home sale price: $177,000
Average rent for a 3 bedroom home: $1,244
30-Year Fixed VA Loan (Zero downpayment): $1,119
30-Year Fixed FHA Loan (3.5% downpayment): $1,248
30-Year Fixed Conventional Loan (10% downpayment): $1,102
30-Year Fixed Conventional Loan (20% downpayment): $933

Obviously there are other tangible and intangible benefits to home ownership as well...for example, a tangible benefit is the fact you can write-off your mortgage interest on your income taxes, and also deduct some other related expenses each year. An intangible benefit might be that as a homeowner, you have the freedom to paint the walls, decorate, plant a garden, remodel, etc.

So clearly these numbers are just a baseline to give you an idea of housing affordability in certain areas. You definitely need to consult a loan officer to see what type of financing is the best fit for you, and ultimately just how much you can afford - and there are several variables that will affect your interest rate and terms. You should also speak with a CPA or qualified tax professional regarding the mortgage interest and other tax deductions to see how it will affect your particular situation. If you need a good referral to either one, feel free to contact me and I can put you in touch.