Quick answer, this is probably the best time to own a home vs. rent here in the Napa Valley but you might like to read on to understand why.
I am certain many of you here in the Napa Valley who have considered purchasing a home have wondered whether it was better to buy or rent. Here in the Napa Valley, prices are a bit higher than many areas of the country so some of what was in this C.A.R. Newsline article below may not apply. But, let us look at a typical situation here.
In the City of Napa you can buy a 3 bedroom, 2 bath, 1,400 sf home in a good area for $275,000. The monthly payment including property taxes and insurance (PITI) for this home, considering 20% down payment and a 4% 30 year mortgage, is $1,371 per month. Now assume a buyer is in a combined 35% federal and state income bracket, the tax deductible portion of the payment for interest and property taxes paid is $324 per month. Thus the effective payment to own after tax considerations is $1,046 per month ($1,371 PITI – $325 tax benefits). One must not forget maintenance and upkeep. Lets add in $300 per month giving us a $1,671 per month total to own and upkeep this home with the after tax total being $1,346.
Now let us look at the typical rent for the same home. In the City of Napa the average rent is running between $1,600 to $1,800 per month. You can do the math but it is easy to see it is much better to own than rent especially given annual rent increases in Napa of 6%. Granted, there is some sweat equity in keeping up the home, doing yard work etc., but you don’t have to worry about rent increases or your landlord selling the house and you having to move.
Weighing the benefits, this is great time to consider buying. Given the historic low interest rates, this is not going to last. My advice do it within the next six months if you can. If I can help you find the perfect Napa Valley home, please touch base and let’s talk.
Homeownership more affordable than renting in major metros
After years of home price declines and tightening rental markets, homeownership is now more affordable than renting in all but two of the 100 largest metros – even in expensive real estate markets such as New York, Los Angeles and Boston, according to Trulia. Only in Honolulu and San Francisco is renting often a better deal than buying. However, buying a home in these markets might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.
Trulia’s Winter 2012 Rent vs. Buy Index, which tracks whether it is more affordable to rent or buy a home in America’s 100 largest metropolitan areas, is based on asking prices for rental units and for-sale homes on Trulia.com between December 1, 2011, and February 29, 2012. The index reveals the relative cost of renting versus buying for similar homes in similar neighborhoods.
In the San Francisco Bay Area, homeownership is most expensive relative to renting in San Francisco, the Peninsula (San Mateo County) and in the South Bay (Santa Clara County). In the East Bay (Alameda County and Contra Costa County), where vacancies are higher and foreclosures more common, buying looks even better relative to renting than in the rest of the Bay Area. But the region overall has become more affordable, especially in San Francisco and San Mateo counties, where the price-to-rent ratio dropped more than three points between Winter 2011 and Winter 2012.
Even in real estate markets where buying is generally cheaper than renting a home, renting might actually be a better deal on a larger house. In most major metros, the price-to-rent ratio is lower for smaller homes, so buying seems even more affordable relative to renting for a one-bedroom or studio home than for a home with three or more bedrooms. In fact, renting a home with more than two bedrooms can be less expensive than buying in New York, NY-NJ and San Francisco. Size, however, factors less into the rent versus buy decision in Chicago and Miami.
Thank you for reading this post. If I can ever be of help in finding you the perfect property here in the Napa Valley, please email me at Curtis@NapaValleyAddress.com
Your Napa Valley Broker Extraordinaire, selling Real Estate from its heart, Yountville
My website & blog: www.NapaValleyAddress.com