$400k for a 2 br place is expensive by national standards, which would make Sacramento a high-priced real estate market (not hard to believe, most of California is).
He claims $949 a month is much higher than median for a 1 br. That does not seem to fit with what I've seen in high priced real estate markets. By comparison, in Ohio, a brand spanking new two bedroom detached condo (nobody builds 2 br homes in most parts of the country, so you couldn't find a newish one) in a great area would cost maybe $150-175k. But rent on a good one BR apartment is still $750/mo.
I've looked at places in a lot of markets (midwest, Vegas, Bay Area among them) over the last 5 years and if what he says is true, it makes me think the rents in Sacramento are depressed for some unusual reason, and the ratio of mortgage to rent is atypical, and therefore not permanent.
My off the cuff guess as to why would be the terrible real estate market there. It's so hard to sell a house right now for more than you owe the bank on it that a lot of people have taken to renting them out instead, creating an unusually high number of rentals. It's a lot easier to rent a place out at a few hundred bucks below mortgage and pay the difference out of pocket than it is to sell it and pay the bank the 50k you'd owe them after. If you're doing well enough to afford two mortgages, you can pick another house up at a good price, move there, and rent the old. That's exactly how we got our place in Campbell, and what a lot of the places we looked at in the bay area were doing as well.
So maybe he shouldn't buy a home in Sacramento, at least right now. There are lots of times in various markets where this happens and it's financially beneficial to rent until the ratio swings the other way.
By comparison, in Ohio, a brand spanking new two bedroom detached condo (nobody builds 2 br homes in most parts of the country, so you couldn't find a newish one) in a great area would cost maybe $150-175k. But rent on a good one BR apartment is still $750/mo.
Where are you getting your numbers? I grew up in Columbus; most of my friends and family still live there. The cost of a condo there is anywhere from 30-50% more than what you cite, and the rent for a 1BR apartment is 20-30% less.
He claims $949 a month is much higher than median for a 1 br. That does not seem to fit with what I've seen in high priced real estate markets. By comparison, in Ohio, a brand spanking new two bedroom detached condo (nobody builds 2 br homes in most parts of the country, so you couldn't find a newish one) in a great area would cost maybe $150-175k. But rent on a good one BR apartment is still $750/mo.
I've looked at places in a lot of markets (midwest, Vegas, Bay Area among them) over the last 5 years and if what he says is true, it makes me think the rents in Sacramento are depressed for some unusual reason, and the ratio of mortgage to rent is atypical, and therefore not permanent.
My off the cuff guess as to why would be the terrible real estate market there. It's so hard to sell a house right now for more than you owe the bank on it that a lot of people have taken to renting them out instead, creating an unusually high number of rentals. It's a lot easier to rent a place out at a few hundred bucks below mortgage and pay the difference out of pocket than it is to sell it and pay the bank the 50k you'd owe them after. If you're doing well enough to afford two mortgages, you can pick another house up at a good price, move there, and rent the old. That's exactly how we got our place in Campbell, and what a lot of the places we looked at in the bay area were doing as well.
So maybe he shouldn't buy a home in Sacramento, at least right now. There are lots of times in various markets where this happens and it's financially beneficial to rent until the ratio swings the other way.