Does it make more sense to rent or buy a home in the Sacramento area? The data is here...

For the last few years in the month of January, I have written about the difference between typical monthly mortgage payments vs. the average rent payments in certain neighborhoods in the greater Sacramento area. I thought I would start 2015 much the same way, updated with today's interest rates, average Sacramento home prices, and average rents.

2015 has started and my phone has been ringing off the hook. I have been busy with both home buyers and sellers. Who has been calling me? Prospective home buyers who finally have decided that 2015 is the time take the plunge and buy a home in Sacramento, folks who are 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 2015 who are looking to sell an investment property they've been holding on to. This is very similar to my activity that started 2014...

While home values have increased a bit since this time 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 median home price and probable monthly mortgage payment in particular Sacramento neighborhoods vs. the typical 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. So as per usual, let's take a look at a few different areas...just for the sake of citing my information sources, for median home price (used to calculate mortgage payment scenarios) I am using most recent year end December 2014 Trendgraphix data, which is taken directly from MLS, and for average rent I am using the most recent Q4 2014 Homepointe Quarterly Residential Rental Survey. For my mortgage payment calculations, I am basing it on a 4.0% 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
Median single family home sale price: $288,000
Average rent for a 3 bedroom home: $1,353 (range $1,095 - $1,795)
30-Year Fixed VA Loan (Zero downpayment): $1,788
30-Year Fixed FHA Loan (3.5% downpayment): $2,046
30-Year Fixed Conventional Loan (10% downpayment): $1,735
30-Year Fixed Conventional Loan (20% downpayment): $1,483

Elk Grove / Laguna - 95757, 95758
Median single family home sale price: $321,000
Average rent for a 3 bedroom home: $1,471 (range $1,195 - $1,950)
30-Year Fixed VA Loan (Zero downpayment): $1,993
30-Year Fixed FHA Loan (3.5% downpayment): $2,281
30-Year Fixed Conventional Loan (10% downpayment): $1,934
30-Year Fixed Conventional Loan (20% downpayment): $1,654

Rosemont / College Greens - 95826, 95827
Median single family home sale price: $244,000
Average rent for a 3 bedroom home: $1,239 (range $90 - $1,495)
30-Year Fixed VA Loan (Zero downpayment): $1,515
30-Year Fixed FHA Loan (3.5% downpayment): $1,734
30-Year Fixed Conventional Loan (10% downpayment): $1,470
30-Year Fixed Conventional Loan (20% downpayment): $1,257

Arden - 95821, 95825, 95864
Median single family home sale price: $250,000
Average rent for a 3 bedroom home: $1,275 (range $995 - $1700)
30-Year Fixed VA Loan (Zero downpayment): $1,552
30-Year Fixed FHA Loan (3.5% downpayment): $1,776
30-Year Fixed Conventional Loan (10% downpayment): $1,506
30-Year Fixed Conventional Loan (20% downpayment): $1,288

Carmichael, Fair Oaks - 95608, 95628
Median single family home sale price: $318,000
Average rent for a 3 bedroom home: $1,649 (range $900 - $2,600)
30-Year Fixed VA Loan (Zero downpayment): $1,974
30-Year Fixed FHA Loan (3.5% downpayment): $2,259
30-Year Fixed Conventional Loan (10% downpayment): $1,916
30-Year Fixed Conventional Loan (20% downpayment): $1,638

Citrus Heights, Orangevale - 95610, 95621, 95662
Median single family home sale price: $251,000
Average rent for a 3 bedroom home: $1,278 (range $995 - $1,550)
30-Year Fixed VA Loan (Zero downpayment): $1,558
30-Year Fixed FHA Loan (3.5% downpayment): $1,783
30-Year Fixed Conventional Loan (10% downpayment): $1,512
30-Year Fixed Conventional Loan (20% downpayment): $1,293

South Land Park, Pocket / Greenhaven - 95822, 95831
Median single family home sale price: $223,000
Average rent for a 3 bedroom home: $1,293 (range $1,000 - $1,795)
30-Year Fixed VA Loan (Zero downpayment): $1,384
30-Year Fixed FHA Loan (3.5% downpayment): $1,584
30-Year Fixed Conventional Loan (10% downpayment): $1,344
30-Year Fixed Conventional Loan (20% downpayment): $1,149

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 or deduct 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. And of course I can help you purchase your home and all that goes with it...