For anyone considering buying a home in 2011 in Sacramento, the news from Trulia—a major real estate search site— that it’s cheaper to buy than to rent around Sacramento is good news for prospective homebuyers—whether long-time renters or first-time homebuyers. According to a statement by Pete Flint, CEO and co-founder of Trulia, many former homeowners have flooded the rental market (as they have lost their homes to a short sale or foreclosure) and following the principles of supply and demand, the cost of renting has gone up.
How Trulia arrived at its rent vs. buy index
Trulia arrived at the index by comparing the median list price with the median rent on two-bedroom apartments, condos, and townhomes as of January 10, 2011. The index takes into account the total cost of homeownership compared with the total cost of renting.
Homeownership costs
The homeownership costs include mortgage principal and interest, property taxes, hazard insurance, purchase closing costs, homeowners association dues (if applicable), and private mortgage insurance (if required by the lender). The homeownership cost calculation also includes tax advantages from mortgage interest, property tax, and closing-cost deductions.
Rental costs
The calculations for total rental cost include rent and renters insurance.
The bottom line: a price-to-rent ratio of between 1 and 15 means that it’s much cheaper to buy than to rent in a particular city. And a ratio above 20 indicates that owning is much more costly than renting in a city.
So where does Sacramento ranks?
Sacramento ranked 7th among the top 10 cities to buy versus rent with a price-to-rent ratio of 10.
For a change, it’s some good news for prospective homebuyers in Sacramento. all4now
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