Rent or Buy? Cities With the Highest & Lowest Price-to-rent Ratios

Rent or buy apartment view
Photo Credit: Alamy Stock Photo

By Jeff Smith

It’s been over a decade since the collapse of the U.S. housing market and the ensuing Great Recession. After falling sharply during the housing crisis, home prices have not only recovered but are up by more than 50 percent nationally from the lowest levels.

But rent prices have only increased by approximately 20 percent nationally over the same time period, according to Zillow. That makes owning a home increasingly more expensive compared to renting. Not surprisingly, homeownership rates remain far below pre-recession levels.

Rent or buy homeownership trend

The ratio of home prices to annual rents in a given area is known as the price-to-rent ratio. It indicates the relative affordability of buying compared to renting. A higher price-to-rent ratio indicates that a location is more favorable to rent and a lower price-to-rent ratio indicates that it’s more favorable to buy.

According to data from Zillow, the U.S. has experienced a steady increase in its price-to-rent ratio over the last eight years, meaning that buying a home has become relatively less affordable. In 2019, the average Zillow Home Price index was $240,481 and the average Zillow Rent Value Index was $1,584 per month ($19,008 annually), yielding a national price-to-rent ratio of 12.7.

Rent or buy price ratio trend

While the overall price-to-rent ratio in the U.S. has been on the rise, price-to-rent ratios vary considerably across states and cities.

With an average home value of $106,627 and an average rent of $878 per month ($10,536 annually), West Virginia has the lowest price-to-rent ratio of any state, meaning it is the most favorable state for homebuyers on average.

At the upper end, Hawaii boasts the highest price-to-rent ratio, making it a more favorable state for renters. Home values tend to be significantly higher than rent prices on the West Coast, making the price-to-rent ratios likewise higher in those states.

Rent or buy price to rent by state

To determine the U.S. cities with the highest and lowest price-to-rent ratios, researchers at Self Financial analyzed the latest data from Zillow. The researchers ranked cities according to the price-to-rent ratio.

Researchers also calculated the 5-year change in the price-to-rent ratio, the monthly mortgage payment for an average home, and the equivalent home price for a $1,500 per month rental based on the price-to-rent ratio.

The home value index and rent value index are Zillow’s measures of a typical home and typical rent value, respectively.

To improve relevance, only cities with at least 100,000 people were included in the analysis. Additionally, cities were grouped into the following cohorts based on population size:

  • Small cities: 100,000-150,000
  • Midsize cities: 150,000-350,000
  • Large cities: more than 350,000

Here are the U.S. cities with the highest and lowest price-to-rent ratios.

Rent or buy price to rent by city

The 10 Large Cities With the Highest Price-to-Rent Ratios

Rent or buy Seattle
Photo Credit: Alamy Stock Photo of Seattle, WA

1. Seattle, Washington

  • Price-to-rent ratio: 27.5
  • 5-year change in price-to-rent ratio: 31.8%
  • Home value index: $741,325
  • Typical monthly mortgage payment: $2,811
  • Rent value index: $2,243
  • Home price for a $1,500 per month rental: $495,686

Rent or buy San Jose, CA
Photo Credit: Alamy Stock Photo of San Jose, CA

2. San Jose, California

  • Price-to-rent ratio: 26.9
  • 5-year change in price-to-rent ratio: 18.4%
  • Home value index: $1,013,883
  • Typical monthly mortgage payment: $3,844
  • Rent value index: $3,140
  • Home price for a $1,500 per month rental: $484,339

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Rent or buy San Francisco
Photo Credit: Alamy Stock Photo of San Francisco

3. San Francisco, California

  • Price-to-rent ratio: 26.8
  • 5-year change in price-to-rent ratio: 29.2%
  • Home value index: $1,370,553
  • Typical monthly mortgage payment: $5,197
  • Rent value index: $4,261
  • Home price for a $1,500 per month rental: $482,495

Rent or buy NYC
Photo Credit: Alamy Stock Photo of New York City

4. New York, New York

  • Price-to-rent ratio: 23.2
  • 5-year change in price-to-rent ratio: 15.1%
  • Home value index: $654,739
  • Typical monthly mortgage payment: $2,483
  • Rent value index: $2,350
  • Home price for a $1,500 per month rental: $417,919

Rent or buy Washington, DC
Photo Credit: Alamy Stock Photo or Washington, DC

5. Washington, D.C.

  • Price-to-rent ratio: 22.2
  • 5-year change in price-to-rent ratio: 11.0%
  • Home value index: $623,061
  • Typical monthly mortgage payment: $2,362
  • Rent value index: $2,335
  • Home price for a $1,500 per month rental: $400,254

Rent or buy Portland, OR
Photo Credit: Alamy Stock Photo of Portland, OR

6. Portland, Oregon

  • Price-to-rent ratio: 22.0
  • 5-year change in price-to-rent ratio: 19.6%
  • Home value index: $453,944
  • Typical monthly mortgage payment: $1,721
  • Rent value index: $1,723
  • Home price for a $1,500 per month rental: $395,307

Rent or buy Long Beach
Photo Credit: Alamy Stock Photo of Long Beach, CA

7. Long Beach, California

  • Price-to-rent ratio: 21.3
  • 5-year change in price-to-rent ratio: 11.2%
  • Home value index: $591,688
  • Typical monthly mortgage payment: $2,244
  • Rent value index: $2,316
  • Home price for a $1,500 per month rental: $383,245

Rent or buy Oakland, CA
Photo Credit: Alamy Stock Photo of Oakland, CA

8. Oakland, California

  • Price-to-rent ratio: 21.2
  • 5-year change in price-to-rent ratio: 19.2%
  • Home value index: $745,826
  • Typical monthly mortgage payment: $2,828
  • Rent value index: $2,938
  • Home price for a $1,500 per month rental: $380,739

Rent or buy Los Angeles
Photo Credit: Alamy Stock Photo of Los Angeles, CA

9. Los Angeles, California

  • Price-to-rent ratio: 21.1
  • 5-year change in price-to-rent ratio: 14.8%
  • Home value index: $705,620
  • Typical monthly mortgage payment: $2,675
  • Rent value index: $2,789
  • Home price for a $1,500 per month rental: $379,479

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Rent or buy San Diego
Photo Credit: Alamy Stock Photo of San Diego, CA

10. San Diego, California

  • Price-to-rent ratio: 20.9
  • 5-year change in price-to-rent ratio: 8.1%
  • Home value index: $637,937
  • Typical monthly mortgage payment: $2,419
  • Rent value index: $2,546
  • Home price for a $1,500 per month rental: $375,871

The 10 Large Cities With the Lowest Price-to-Rent Ratios

Rent or buy Detroit
Photo Credit: Alamy Stock Photo of Detroit, MI

1. Detroit, Michigan

  • Price-to-rent ratio: 3.5
  • 5-year change in price-to-rent ratio: 80.0%
  • Home value index: $34,760
  • Typical monthly mortgage payment: $132
  • Rent value index: $825
  • Home price for a $1,500 per month rental: $63,200

Rent or buy Cleveland
Photo Credit: Alamy Stock Photo of Cleveland, OH

2. Cleveland, Ohio

  • Price-to-rent ratio: 5.8
  • 5-year change in price-to-rent ratio: 39.3%
  • Home value index: $65,243
  • Typical monthly mortgage payment: $247
  • Rent value index: $930
  • Home price for a $1,500 per month rental: $105,230

Rent or buy Memphis
Photo Credit: Alamy Stock Photo of Memphis, TN

3. Memphis, Tennessee

  • Price-to-rent ratio: 8.4
  • 5-year change in price-to-rent ratio: 32.9%
  • Home value index: $92,948
  • Typical monthly mortgage payment: $352
  • Rent value index: $920
  • Home price for a $1,500 per month rental: $151,546

Rent or buy Baltimore
Photo Credit: Alamy Stock Photo of Baltimore, MD

4. Baltimore, Maryland

  • Price-to-rent ratio: 9.8
  • 5-year change in price-to-rent ratio: 16.4%
  • Home value index: $149,819
  • Typical monthly mortgage payment: $568
  • Rent value index: $1,275
  • Home price for a $1,500 per month rental: $176,257

Rent or buy Milwaukee
Photo Credit: Alamy Stock Photo of Milwaukee, WI

5. Milwaukee, Wisconsin

  • Price-to-rent ratio: 11.0
  • 5-year change in price-to-rent ratio: 20.6%
  • Home value index: $126,847
  • Typical monthly mortgage payment: $481
  • Rent value index: $963
  • Home price for a $1,500 per month rental: $197,684

Rent or buy Houston
Photo Credit: Alamy Stock Photo of Houston, TX

6. Houston, Texas

  • Price-to-rent ratio: 11.3
  • 5-year change in price-to-rent ratio: 26.0%
  • Home value index: $186,952
  • Typical monthly mortgage payment: $709
  • Rent value index: $1,380
  • Home price for a $1,500 per month rental: $203,209

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Rent or buy Philadelphia
Photo Credit: Alamy Stock Photo of Philadelphia, PA

7. Philadelphia, Pennsylvania

  • Price-to-rent ratio: 11.3
  • 5-year change in price-to-rent ratio: 22.1%
  • Home value index: $179,033
  • Typical monthly mortgage payment: $679
  • Rent value index: $1,320
  • Home price for a $1,500 per month rental: $203,446

Rent or buy Tulsa
Photo Credit: Alamy Stock Photo of Tulsa, OK

8. Tulsa, Oklahoma

  • Price-to-rent ratio: 11.6
  • 5-year change in price-to-rent ratio: 12.9%
  • Home value index: $125,077
  • Typical monthly mortgage payment: $474
  • Rent value index: $900
  • Home price for a $1,500 per month rental: $208,461

Rent or buy Kansas City, MO
Photo Credit: Alamy Stock Photo of Kansas City, MO

9. Kansas City, Missouri

  • Price-to-rent ratio: 11.7
  • 5-year change in price-to-rent ratio: 26.1%
  • Home value index: $155,539
  • Typical monthly mortgage payment: $590
  • Rent value index: $1,113
  • Home price for a $1,500 per month rental: $209,716

Rent or buy El Paso
Photo Credit: Alamy Stock Photo of El Paso, TX

10. El Paso, Texas

  • Price-to-rent ratio: 11.9
  • 5-year change in price-to-rent ratio: 15.3%
  • Home value index: $134,095
  • Typical monthly mortgage payment: $508
  • Rent value index: $941
  • Home price for a $1,500 per month rental: $213,791

Detailed Findings & Methodology

With price-to-rent ratios all over 20, the cities with the highest price-to-rent ratios are places well-known to have high home prices. But just because their price-to-rent ratios are high, doesn’t mean that rent is affordable in these cities either. The average home value for these cities is over $750,000, while the typical rent is over $2,800 per month.

The cities with the lowest price-to-rent ratios—all under 12—have an average home value of $125,000 and average monthly rent of $1,057. While buying a home is relatively more affordable than renting in these cities, both home and rent prices are much lower than the national averages.

As home prices have rebounded since the recession, cities across the country have seen increases in their price-to-rent ratios in the last 5 years. From 2014 to 2019, the overall price-to-rent ratio in the U.S. increased by 14.7 percent.

Many cities experienced much larger increases, while a handful had their price-to-rent ratios decline.

Rent or buy city map

To find the cities with the highest and lowest price-to-rent ratios, Self Financial analyzed data from Zillow. The price-to-rent ratio was calculated as the ratio of Zillow’s home value index to Zillow’s annualized rent index.

The typical monthly mortgage payment was calculated assuming a 30-year fixed mortgage, a 20 percent down payment, and a mortgage rate of 3.94 percent (the average national rate for 2019 from Freddie Mac). The home price for a $1,500 per month rental was calculated as ($1,500 x 12 x the price-to-rent ratio).

Additionally, cities were grouped into the following cohorts based on population size:

  • Small cities: 100,000-149,999
  • Midsize cities: 150,000-349,999
  • Large cities: more than 350,000

About the Author

Jeff Smith is the VP of Marketing at Self.

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Written on February 19, 2020
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@self.inc.

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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