When Will Interest Rates Drop? Three Experts Reveal Their Predictions!Mortgage interest rates have been front page news in the real estate market for the past year and have kept many prospective
Sacramento Buying vs Renting Calculator!
Dated: September 13 2023
Views: 1969
Buying or renting in Sacramento? We're going to answer the question up front: it depends on your goals for the next 5-10 years. If you're someone who's undecided on where you're wanting to plant your family roots or when you're planning to do so then renting may be your best option for the next few years. However, if you're someone who's ready to purchase in the Sacramento area sometime in the next year, you'll want to check out what we have in store for you.
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Today we're going to jump into the cost of renting vs buying in the Sacramento area using NerdWallet's buying vs renting calculator and inputting our local statistics to give you a better idea of how much money you can still save by purchasing a house in the Sacramento area, even when interest rates are north of 7 percent!
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If you're unfamiliar with NerdWallet or their buying vs renting calculator you can check that out by clicking here, but what it does is take a range of statistical factors that go into both the buying and renting process and computes the total expenditures you'll incur over a select period of time to determine how much money you'll end up spending either buying a home or renting one.
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For this example we made the following adjustments to give us a more accurate depiction of the difference between buying and renting in the Sacramento area:
- Home Price: $556,000 (Q2 Avg. Sale Price in Sacramento via Metrolist)
- Down Payment: 5%
- Mortgage Interest Rate: 7.12%
- Monthly Rent: $2,500 (Avg. Rent Price of Single Family Home in Sacramento via Zillow)
- Home Appreciation Rate: 5.49% (California average since 2000, Sacramento has seen over 12% in the last 15 years)
- Rent Inflation: 3% (Sacramento has been at 5% annually these past 5 years)
- General Inflation: 3% (Currently 3.6%, Fed's goal is 2%)
- Tax Filing: Joint
- Household Income: $100,000
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You can view the full list of factors here.
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Time for the results!
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As you'll see here, should you decide to purchase a home in our current market you'd be looking at spending more money over the next 4 years than you would have should you have decided to rent. A larger monthly payment as well as your down payment and closing costs are quite expensive pills to swallow when purchasing a home vs renting one. However, if you've read this far into the blog post I imagine your plans involve remaining in our area for the next 5-10 years, and that is where purchasing a home becomes a no-brainer in our opinion(and that of the calculators).
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As you'll see in the chart above, once you surpass the 4 year break-even point the savings keep on growing as the home you purchased continues to increase in value and the monthly payments you've been making begin to pile up. By the 10 year mark you will have saved yourself over $110,000. What if you hold it for 20 years?
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After 20 years of living in your home you will have saved you and your family over $300,000. Should you rent over that same time period you'd be looking at paying over TWICE as much as you would have had you decided to purchase a home.
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On the renting side, this doesn't account for the number of security deposits you would pile up should you move multiple times between rentals over the years. On the buying side it doesn't take into account your ability to refinance to a lower rate than the 7.12% rate we used for this example.
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We highly recommend going to their site and playing around with their rent vs buy calculator for yourself to give yourself a better idea on the cost benefits of buying a home vs renting one in Sacramento.
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If you found this information useful stay tuned for more of our teams content and visit our website for related articles and more information!
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Fernando Mota
(916)494-9543
Fernando Mota
Fernando Mota, a long-term Sacramento resident, has spent his professional life honing the skills that bolster his successful real estate career. With a background in auto sales, Fernando brings all o....
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