To rent or to buy? SmartAsset crunched the numbers for that age old question and found that it is a renter’s market on average in the U.S., according to data from the Census Bureau’s American Community Survey for 2018. But the full story is more complicated than that as each local housing market varies. A renter in California may be saving money, but those in the Midwest may be better off putting down more permanent roots. See SmartAsset’s breakdown of which of the 50 largest U.S. cities are best for homebuying and which are more suited for renting using the price-to-rent-ratio, which compares the median annual rent to the median home value.
A central question for most Americans when choosing where to live is whether to rent or buy. Each comes with its pros and cons. Renting a place can offer more flexibility without the burden of mortgage payments, but means you are spending money each month without building any equity. Buying means you can build equity and have the pride of owning your home, but it can be risky if the market takes a tumble and your mortgage ends up underwater. With all of this in mind, SmartAsset decided to find the cities in America which most favor renters and those which most favor buyers.
We did this by calculating the price-to-rent ratio of the 50 largest cities in America. The price-to-rent ratio is the ratio of the median home value to the median annual rent. As a general rule, a lower price-to-rent ratio means conditions are more favorable for buying a home. By contrast, a higher price-to-rent ratio means conditions are better for renting. According to Trulia’s Rent vs. Buy Index, the specific thresholds are as follows: a price-to-rent ratio of 1 to 15 indicates that buying is more favorable, a ratio of 16 to 20 indicates that renting is typically more favorable and a ratio of 21 or more indicates that renting is more favorable. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.
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