The monthly costs of renting a home versus buying a home in Sacramento - how do they compare?

I have kicked off the beginning of the last few years with blog posts about the costs of renting versus buying a home in Sacramento. It's not a big secret that apartment and single family home rents in Sacramento are increasing. According to a recent article from the Sacramento Bee, rents in Sacramento from mid-2016 to mid-2017 increased on average 9.9%.

Last year, many of my clients stated one of their reasons for buying a home was, among many other things, so they could take more control over their monthly housing expenses. Many figured that if they remained renters, they would potentially have to deal with regular rent increases, and if they purchased their home the monthly mortgage would be a fixed expense. Additionally in many cases, the cost of purchasing a home is actually less than the cost of rent.

So today, as I have before, I thought I would break down a few home purchase scenarios by zip code. 

• The rental rate data I refer to is the average for a 3-bedroom single family home according to Rent-o-Meter, which compiles rental data from around the United States from a variety of sources. I also note the "80% range". So keep in mind there are lower rents in the range, as well as higher rents, however those are probably "outliers" and that range captures the majority of where rents fall.
• The median home price data I refer to is from November 2017 (most recent data available) per Trendgraphix, which compiles Metrolist MLS home sales data.
• For estimating the monthly payment, I am using today's market interest rates - which according to Freddie Mac, the average rate for last week in the nation for a 30-year fixed mortgage was 3.99% (rounded up to 4%). The monthly payment will be the "fully loaded" payment with principal, interest, property taxes and homeowners insurance (and mortgage insurance if applicable).
  
  
  Carmichael - 95608
  Median single family home price: $374,000
  Average rent for a 3 bedroom home: $1,784 (80% range $1,395 - $2,195)
  30-Year Fixed VA Loan (zero downpayment): $2,237
  30-Year Fixed FHA Loan (3.5% downpayment): $2,419
  30-Year Fixed Conventional Loan (10% downpayment): $2,233
  30-Year Fixed Conventional Loan (20% downpayment): $1,895
  
  Citrus Heights - 95610
  Median single family home price: $325,000
  Average rent for a 3 bedroom home: $1,756 (80% range $1,450 - $2,100)
  30-Year Fixed VA Loan (zero downpayment): $1,944
  30-Year Fixed FHA Loan (3.5% downpayment): $2,111
  30-Year Fixed Conventional Loan (10% downpayment): $1,931
  30-Year Fixed Conventional Loan (20% downpayment): $1,647
  
  Orangevale - 95662
  Median single family home price: $368,000
  Average rent for a 3 bedroom home: $1,792 (80% range $1,525 - $2,000)
  30-Year Fixed VA Loan (zero downpayment): $2,202
  30-Year Fixed FHA Loan (3.5% downpayment): $2,382
  30-Year Fixed Conventional Loan (10% downpayment): $2,187
  30-Year Fixed Conventional Loan (20% downpayment): $1,865
  
  Elk Grove - 95758
  Median single family home price: $380,000
  Average rent for a 3 bedroom home: $1,724 (80% range $1,550 - $1,950)
  30-Year Fixed VA Loan (zero downpayment): $2,273
  30-Year Fixed FHA Loan (3.5% downpayment): $2,457
  30-Year Fixed Conventional Loan (10% downpayment): $2,258
  30-Year Fixed Conventional Loan (20% downpayment): $1,926
  
  Land Park / Curtis Park - 95818
  Median single family home price: $486,000
  Average rent for a 3 bedroom home: $2,313 (80% range $1,725 - $3,000)
  30-Year Fixed VA Loan (zero downpayment): $2,907
  30-Year Fixed FHA Loan (3.5% downpayment): $3,124
  30-Year Fixed Conventional Loan (10% downpayment): $2,888
  30-Year Fixed Conventional Loan (20% downpayment): $2,463
  
  Tahoe Park / Tallac Village / Colonial Heights - 95820
  Median single family home price: $260,000
  Average rent for a 3 bedroom home: $1,568 (80% range $1,295 - $2,000)
  30-Year Fixed VA Loan (zero downpayment): $1,555
  30-Year Fixed FHA Loan (3.5% downpayment): $1,702
  30-Year Fixed Conventional Loan (10% downpayment): $1,545
  30-Year Fixed Conventional Loan (20% downpayment): $1,318
  
  Rosemont / College Greens - 95826
  Median single family home price: $325,000
  Average rent for a 3 bedroom home: $1,652 (80% range $1,450 - $1,900)
  30-Year Fixed VA Loan (zero downpayment): $1,944
  30-Year Fixed FHA Loan (3.5% downpayment): $2,111
  30-Year Fixed Conventional Loan (10% downpayment): $1,931
  30-Year Fixed Conventional Loan (20% downpayment): $1,647
  
  Pocket / Greenhaven - 95831
  Median single family home price: $406,000
  Average rent for a 3 bedroom home: $1,835 (80% range $1,550 - $2,213)
  30-Year Fixed VA Loan (zero downpayment): $2,429
  30-Year Fixed FHA Loan (3.5% downpayment): $2,620
  30-Year Fixed Conventional Loan (10% downpayment): $2,413
  30-Year Fixed Conventional Loan (20% downpayment): $2,058
  
  Arden / Arden Park / Sierra Oaks - 95864
  Median single family home price: $460,000
  Average rent for a 3 bedroom home: $1,775 (range $1,395 - $2,695)
  30-Year Fixed VA Loan (zero downpayment): $2,752
  30-Year Fixed FHA Loan (3.5% downpayment): $2,960
  30-Year Fixed Conventional Loan (10% downpayment): $2,743
  30-Year Fixed Conventional Loan (20% downpayment): $2,331
  
  These numbers are just a baseline to give you an idea of housing affordability in certain areas, and where it might make sense to purchase versus continue to rent. There are other tangible and intangible benefits to homeownership as well. For example, you may be able to deduct mortgage interest, property tax, and other expenses on your annual income tax return (consult your CPA). Additionally as a homeowner, you will have the freedom to decorate as you choose, plant a garden, remodel, and customize your home in other ways that might not make sense as a renter. I picked these zip codes at random...if there is another area that interests you, I would be happy to provide information specific to your situation.