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Price Rent Where to Buy: Price to Rent Ratio in 76 US Cities

The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000).

Find the U.S. Counties where buying makes more sense than renting.

It is a useful statistic for comparing the relative costs of buying and renting across different markets, and it can be especially helpful when deciding whether to buy or to rent. As a general rule, a lower price-to-rent ratio indicates that a place is more favorable to homebuyers, while a higher ratio indicates a better environment for renters.

Price-to-Rent Ratio by City

Using U.S. Census data, SmartAsset calculated the price-to-rent ratio in every U.S. city with a population over 250,000. Applying that ratio, we also calculated a projected average home price for a house or apartment that rents for $1,000 in each market.

Note that actual home values will vary based on factors such as proximity to commercial centers, access to transit and home size—rentals tend to be smaller (and therefore less expensive) than for-sale properties, so these values may overestimate true market prices.

PRICE-TO-RENT RATIO
City Price-to-Rent
Ratio
Home Price
(for a $1,000 Rental)
San Francisco, California 45.88 $550,560
Honolulu, Hawaii 40.11 $481,320
Oakland, California 38.5 $462,000
Los Angeles, California 38.02 $456,240
New York, New York 35.65 $427,800
Seattle, Washington 35.09 $421,080
San Jose, California 34.72 $416,640
Long Beach, California 34.6 $415,200
Washington, District of Columbia 32.02 $384,240
Anaheim, California 31.27 $375,240
San Diego, California 30.27 $363,240
Portland, Oregon 29.26 $351,120
Boston, Massachusetts 28.69 $344,280
Jersey City, New Jersey 26.34 $316,080
Denver, Colorado 26.01 $312,120
Chula Vista, California 25.81 $309,720
Santa Ana, California 25.25 $303,000
Sacramento, California 24.26 $291,120
Miami, Florida 23.36 $280,320
Austin, Texas 23.36 $280,320
Atlanta, Georgia 22.99 $275,880
Colorado Springs, Colorado 22.8 $273,600
Bakersfield, California 22.51 $270,120
Raleigh, North Carolina 22.37 $268,440
Riverside, California 22.35 $268,200
Lexington, Kentucky 22 $264,000
Albuquerque, New Mexico 21.9 $262,800
Chicago, Illinois 21.6 $259,200
Henderson, Nevada 21.55 $258,600
Chandler, Arizona 21.46 $257,520
New Orleans, Louisiana 21.36 $256,320
Virginia Beach, Virginia 21.12 $253,440
Fresno, California 21.03 $252,360
Newark, New Jersey 20.97 $251,640
Minneapolis, Minnesota 20.97 $251,640
Anchorage, Alaska 20.88 $250,560
Phoenix, Arizona 20.3 $243,600
Louisville, Kentucky 20.09 $241,080
St. Paul, Minnesota 19.95 $239,400
Plano, Texas 19.91 $238,920
Stockton, California 19.51 $234,120
Durham, North Carolina 19.46 $233,520
Las Vegas, Nevada 19.34 $232,080
Nashville, Tennessee 19.14 $229,680
Greensboro, North Carolina 19.1 $229,200
Mesa, Arizona 19.1 $229,200
Lincoln, Nebraska 19.09 $229,080
Oklahoma City, Oklahoma 19.07 $228,840
Wichita, Kansas 18.39 $220,680
Charlotte, North Carolina 18.1 $217,200
Cincinnati, Ohio 18 $216,000
Aurora, Colorado 17.97 $215,640
Kansas City, Missouri 17.42 $209,040
Tulsa, Oklahoma 17.22 $206,640
Omaha, Nebraska 16.7 $200,400
St. Louis, Missouri 16.7 $200,400
Orlando, Florida 16.62 $199,440
Tampa, Florida 16.55 $198,600
Tucson, Arizona 16.32 $195,840
Philadelphia, Pennsylvania 16.3 $195,600
Dallas, Texas 16.19 $194,280
Laredo, Texas 15.94 $191,280
Columbus, Ohio 15.86 $190,320
St. Petersburg, Florida 15.77 $189,240
Fort Wayne, Indiana 15.52 $186,240
Baltimore, Maryland 15.48 $185,760
Arlington, Texas 15.47 $185,640
El Paso, Texas 15.4 $184,800
Indianapolis, Indiana 15.35 $184,200
Houston, Texas 15.29 $183,480
Fort Worth, Texas 14.77 $177,240
Jacksonville, Florida 14.34 $172,080
Milwaukee, Wisconsin 14.19 $170,280
San Antonio, Texas 13.68 $164,160
Toledo, Ohio 13.26 $159,120
Corpus Christi, Texas 13.14 $157,680
Memphis, Tennessee 12.26 $147,120
Pittsburgh, Pennsylvania 12 $144,000
Buffalo, New York 10.71 $128,520
Cleveland, Ohio 10.52 $126,240
Detroit, Michigan 6.27 $75,240

Renting vs. Buying

The cities with the highest price-to-rent ratios are San Francisco, Honolulu and New York City, which means that they are least friendly to buyers. San Fran’s price-rent ratio of 45.88 is reflective of a market that is highly unfavorable to buyers, although with rents soaring that may soon change.

In NYC, an apartment that rents for $1,000 should cost around $427,800. That, however, represents the entire market—all five boroughs. In Manhattan and Brooklyn, the numbers look even worse. Here are the price-to-rent ratios for the five New York boroughs individually (prices for $1,000 rental in parenthesis):

Manhattan – 50.68 ($608,160)

Brooklyn – 42.17 ($506,040)

Queens – 29.21 ($350,520)

The Bronx – 30.95 ($371,400)

Staten Island – 36.86 ($442,320)

Based on its ratio of rental costs to home values, Manhattan is probably the most expensive place to buy a home in the country. At the other end of the spectrum are places like Houston, San Antonio and Dallas. These Texan markets are very favorable to home-buyers, with ratios below the national average price-to-rent ratio of 19.21.

The city with the lowest ratio in the United States is Detroit, with a price-to-rent ratio of 6.27. That means that a $1,000 rental in Detroit should sell for just $75,240. Indeed, Wayne County, in which Detroit is located, is the best county for buyers in Michigan.

Historical Price-to-Rent Ratio

National and city price-to-rent ratios have risen and fallen over the years depending on the state of the housing market. In the years before the housing crisis, as the housing market heated up, the national ratio rose from 22.73 (in 2005) to 24.50 (in 2007). Then, however, after the real estate market turned, as home prices fell and rentals grew more expensive, the ratio began to fall, dipping below 20 in 2011, down to the current rate of 19.21.

Before the housing bubble and subsequent crisis, the average hovered somewhere around 15. That indicates that we are still in a time period that is more favorable to renters than buyers from a historical perspective.

What Price-to-Rent Ratio Says About Affordability

While the price-to-rent ratio is useful for comparing buying to renting, it does not reflect the overall affordability of buying or renting in a given market. In theory, a place where renting and buying are very expensive could have the same price-to-rent ratio as a place where both renting and buying are very cheap.

Take San Francisco for example. San Fran has the highest price-to-rent ratio in the country, which indicates that renting should be more affordable than buying in the City by the Bay. However, as we all know, rentals in San Francisco are very expensive. The city’s high price-rent ratio is only reflective of the fact that buying is relatively more expensive than renting. It does not saying anything about absolute affordability of either buying or renting in that city.

Photo credit: flickr

Nick Wallace Nick Wallace studied economics at the University of Washington, and currently lives in Brooklyn, NY.

Comments

Jeanne M 1 year ago
Interesting way to approach the rent/buy decision. Thanks!
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