This story originally appeared on Roofstock.
In recent years, home prices have been increasing faster than rents in the U.S., making homeownership less attractive. After dropping significantly during the housing crisis, home prices not only recovered but rose by nearly 70% from the lowest levels. However, despite rising home values, in some parts of the country, renting is still more expensive than owning when comparing monthly rents with monthly mortgage payments.
According to data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD), the median monthly rent in the U.S. is $1,369, while the monthly mortgage payment on a median-price home at current interest rates is less than $900.
Housing and rental prices vary considerably on a geographic basis. When considering whether to buy or rent, the rent-to-price ratio can be a useful metric — calculated as median annual rent as a percentage of median home price in a given area. In locations with high rent-to-price ratios, it can be better to buy; whereas, in those with low rent-to-price ratios, it can be more cost-effective to rent.
To find the metros with the highest rent-to-price ratio, our researchers analyzed the latest data from HUD, the U.S. Census Bureau, and Zillow. The researchers ranked metro areas according to the ratio of annual median rent to median home prices. Researchers also calculated the median monthly rent, median home price, and the monthly mortgage payment for a median-price home.
To improve relevance, only metropolitan areas with at least 100,000 people were included in the analysis.
Here are the large metros with the highest rent to home price ratios.
15. Atlanta-Sandy Springs-Alpharetta, GA
- Rent-to-price ratio: 6.51%
- Median monthly rent: $1,384
- Median home price: $255,109
- Monthly mortgage payment for a median-price home: $830
14. Virginia Beach-Norfolk-Newport News, VA-NC
- Rent-to-price ratio: 6.55%
- Median monthly rent: $1,417
- Median home price: $259,731
- Monthly mortgage payment for a median-price home: $845
13. Orlando-Kissimmee-Sanford, FL
- Rent-to-price ratio: 6.57%
- Median monthly rent: $1,472
- Median home price: $268,806
- Monthly mortgage payment for a median-price home: $874
12. Chicago-Naperville-Elgin, IL-IN-WI
- Rent-to-price ratio: 6.59%
- Median monthly rent: $1,402
- Median home price: $255,532
- Monthly mortgage payment for a median-price home: $831
11. Dallas-Fort Worth-Arlington, TX
- Rent-to-price ratio: 6.64%
- Median monthly rent: $1,505
- Median home price: $271,831
- Monthly mortgage payment for a median-price home: $884
10. New Orleans-Metairie, LA
- Rent-to-price ratio: 6.65%
- Median monthly rent: $1,203
- Median home price: $217,016
- Monthly mortgage payment for a median-price home: $706
9. Cleveland-Elyria, OH
- Rent-to-price ratio: 6.67%
- Median monthly rent: $939
- Median home price: $168,994
- Monthly mortgage payment for a median-price home: $550
8. Pittsburgh, PA
- Rent-to-price ratio: 6.69%
- Median monthly rent: $974
- Median home price: $174,771
- Monthly mortgage payment for a median-price home: $569
7. Miami-Fort Lauderdale-Pompano Beach, FL
- Rent-to-price ratio: 6.69%
- Median monthly rent: $1,742
- Median home price: $312,574
- Monthly mortgage payment for a median-price home: $1,017
6. Detroit-Warren-Dearborn, MI
- Rent-to-price ratio: 6.72%
- Median monthly rent: $1,093
- Median home price: $195,270
- Monthly mortgage payment for a median-price home: $635
5. Tampa-St. Petersburg-Clearwater, FL
- Rent-to-price ratio: 6.76%
- Median monthly rent: $1,354
- Median home price: $240,308
- Monthly mortgage payment for a median-price home: $782
4. Rochester, NY
- Rent-to-price ratio: 7.20%
- Median monthly rent: $1,017
- Median home price: $169,546
- Monthly mortgage payment for a median-price home: $552
3. Oklahoma City, OK
- Rent-to-price ratio: 7.48%
- Median monthly rent: $1,067
- Median home price: $171,213
- Monthly mortgage payment for a median-price home: $557
2. Birmingham-Hoover, AL
- Rent-to-price ratio: 7.61%
- Median monthly rent: $1,166
- Median home price: $184,012
- Monthly mortgage payment for a median-price home: $599
1. Memphis, TN-MS-AR
- Rent-to-price ratio: 7.69%
- Median monthly rent: $1,076
- Median home price: $167,904
- Monthly mortgage payment for a median-price home: $546
Detailed Findings & Methodology
To find the metros with the highest rent to home price ratios, Roofstock crunched numbers from the Department of Housing and Urban Development (HUD), the U.S. Census Bureau’s 2019 American Community Survey (ACS), and Zillow. The rent-to-price ratio was calculated as the ratio of annualized median rent to Zillow’s Home Value Index. Median rent was calculated as the weighted average of rent for a studio, one-bedroom, two-bedroom, three-bedroom, four-bedroom, and five-bedroom apartment. The number of renter households by bedroom from the ACS were used as weights. Median home price comes from Zillow’s most recent home value index.
The monthly mortgage payment for a median-price home assumed a 30-year fixed mortgage, 20% down payment, and a 2.72% interest rate.
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