Home / Market Trends / Affordability / Renting Now Cheaper Than Buying in Nearly All Highest-Populated U.S. Cities
Print This Post Print This Post

Renting Now Cheaper Than Buying in Nearly All Highest-Populated U.S. Cities

Many Americans have chosen to rent while saving to buy a home, which is still considered part of the “American dream” that has been a symbol of success for decades.

With the average U.S. home price increasing 70% more than average rent prices since 2016, renting could become a long-term reality for many Americans, according to a new study from Home Bay.

Overall, it is more affordable to rent than buy a home in 90% of the most-populous U.S. cities based on the price differences between monthly rent and mortgage payments. On average, renters save $174 a month, adding up to $2,088 per year.

The report analyzed the 50 most-populous U.S. metros based on their price-to-rent ratios, calculated by dividing the median home price by the median annual rent, to identify the cities where it's most affordable to make the jump from renting to buying a home. A ratio of 15 or lower means it's better to buy, while 21 or higher means it's better to rent. Research found that the national average is 18.

The city with the highest price-to-rent ratio is San Jose, California (ranked at 38), while the lowest is Pittsburgh (12).

The 10 best cities to buy a home based on the price-to-rent ratio are:

  1. Pittsburgh (price-to-rent ratio of 12)
  2. New Orleans (12)
  3. Chicago (12)
  4. Cleveland (12)
  5. Memphis, TN (13)
  6. Miami (13)
  7. Detroit (14)
  8. Oklahoma City (14)
  9. St. Louis (14)
  10. Tampa, FL (14)

The 10 cities where renting over buying makes the most sense based on price-to-rent ratios are:

  1. San Jose, CA (38)
  2. San Francisco (30)
  3. Seattle (26)
  4. Salt Lake City (25)
  5. Los Angeles (25)
  6. Denver (25)
  7. Portland, OR (24)
  8. San Diego (24)
  9. Austin, TX (22)
  10. Sacramento, CA (21)

In addition to the highest price-to-rent ratio, San Jose, CA, also has the highest rent prices ($3,181) and the highest home prices ($1,431,676). In contrast, Milwaukee has the lowest rent prices ($1,214), and Pittsburgh has the lowest home prices ($188,418).

In some cities, the savings renters experience are massive—in Los Angeles, renters save nearly $3,000 a month by paying rent instead of a mortgage, and in San Francisco, residents save a whopping $4,089 monthly by renting.

The study found that, nationally, it would take 166.3 months of rent–almost 14 years–to save up for the typical home purchase price. In San Jose, CA, the number jumps to 450 months–or nearly 38 years.

Read the full report, including more data, charts, and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

Check Also

Federal Reserve Holds Rates Steady Moving Into the New Year

The Federal Reserve’s Federal Open Market Committee again chose that no action is better than changing rates as the economy begins to stabilize.