Rent vs Buy a home in Sacramento? What the hard facts say.....

The last few years around this time I have written blog posts detailing the monthly mortgage payments vs. average rent payments in certain neighborhoods in Sacramento. I thought I would start 2014 with a similar post, updated with today's interest rates, average Sacramento home prices, and average rents.

2014 has started with a bang. I have been super busy with both home buyers and sellers. Who has been calling me? Prospective home buyers who finally have decided that now is the time to buy a home in Sacramento, folks relocating to the area, or looking for a bigger home who also need to sell their current home. I have also been called by several folks so far in 2014 who are looking to sell an investment property they've been holding on to. Interesting...

While home values have increased since last year, it is still currently more affordable in many areas to buy a home in Sacramento than rent a home. And compared to our market's peak in 2005, prices are still extremely low, plus rents seem to have increased.

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. Plus often times the 'average' home that is purchased is much larger or nicer than the 'average' home rented. 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 January 2014 Trendgraphix data, which is taken directly from MLS, and for average rent I am using the most recent Q1 2014 Homepointe Quarterly Residential Rental Survey. For my mortgage payment calculations, I am basing it on a 4.5% 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: $264,000
Average rent for a 3 bedroom home: $1,340 (range $950 - $1,795)
30-Year Fixed VA Loan (Zero downpayment): $1,718
30-Year Fixed FHA Loan (3.5% downpayment): $1,952
30-Year Fixed Conventional Loan (10% downpayment): $1,660
30-Year Fixed Conventional Loan (20% downpayment): $1,422

Elk Grove / Laguna - 95757, 95758
Average single family home sale price: $303,000
Average rent for a 3 bedroom home: $1,380 (range $1,095 - $1,695)
30-Year Fixed VA Loan (Zero downpayment): $1,972
30-Year Fixed FHA Loan (3.5% downpayment): $2,173
30-Year Fixed Conventional Loan (10% downpayment): $1,906
30-Year Fixed Conventional Loan (20% downpayment): $1,632

Rosemont / College Greens - 95826, 95827
Average single family home sale price: $215,000
 Average rent for a 3 bedroom home: $1,259 (range $985 - $1,650)
30-Year Fixed VA Loan (Zero downpayment): $1,399
30-Year Fixed FHA Loan (3.5% downpayment): $1,589
30-Year Fixed Conventional Loan (10% downpayment): $1,352
30-Year Fixed Conventional Loan (20% downpayment): $1,158

Arden - 95821, 95825, 95864
Average single family home sale price: $217,000
Average rent for a 3 bedroom home: $1,258 (range $995 - $1650)
30-Year Fixed VA Loan (Zero downpayment): $1,412
30-Year Fixed FHA Loan (3.5% downpayment): $1,604
30-Year Fixed Conventional Loan (10% downpayment): $1,365
30-Year Fixed Conventional Loan (20% downpayment): $1,168

Carmichael, Fair Oaks - 95608, 95628
Average single family home sale price: $318,000
Average rent for a 3 bedroom home: $1,146 (range $900 - $1,800)
30-Year Fixed VA Loan (Zero downpayment): $2,069
30-Year Fixed FHA Loan (3.5% downpayment): $2,193
30-Year Fixed Conventional Loan (10% downpayment): $2,000
30-Year Fixed Conventional Loan (20% downpayment): $1,713

Citrus Heights, Orangevale - 95610, 95621, 95662
Average single family home sale price: $240,000
Average rent for a 3 bedroom home: $1,262 (range $995 - $1,800)
30-Year Fixed VA Loan (Zero downpayment): $1,194
30-Year Fixed FHA Loan (3.5% downpayment): $1,562
30-Year Fixed Conventional Loan (10% downpayment): $1,509
30-Year Fixed Conventional Loan (20% downpayment): $1,292

South Land Park, Pocket / Greenhaven - 95822, 95831
Average single family home sale price: $262,000
Average rent for a 3 bedroom home: $1,371 (range $995 - $1,795)
30-Year Fixed VA Loan (Zero downpayment): $1,705
30-Year Fixed FHA Loan (3.5% downpayment): $1,937
30-Year Fixed Conventional Loan (10% downpayment): $1,648
30-Year Fixed Conventional Loan (20% downpayment): $1,411

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.