Whether you’re a recent college grad checking out options for your own digs, a just-married couple looking for a starter home, or empty nesters wanting to downsize, sometimes renting is a better option than buying. It just depends where you’re looking, according to SmartAsset, a personal finance technology company.
There are both pluses and minuses to renting a home versus buying one, SmartAsset says. While renting can offer more flexibility without the burden of mortgage payments, monthly rent payments do not build equity in a home. Then again, if the market takes a tumble, any equity in a home you own can leave you with a mortgage worth less than what you’re paying for it.
SmartAsset set out to determine which real estate markets were best suited to renting, rather than owning a home, by dividing the median home value for each city by the median annual rent as reported in the most recent U.S. Census data available, which is from 2018. The city with the highest price-to-rent ratio was the most favorable for renters.
Overall, the national housing market is more favorable for renting than buying, SmartAsset says. The national price-to-rent ratio is 18.09, indicating that on average it makes more economic sense to rent than to buy.
SmartAsset also found that while California’s big cities are friendlier toward home renters than to homebuyers, rental prices are not necessarily a bargain there. Still, many of these large American cities offer diverse opportunities for personal and professional growth, making them a good investment for people whether they buy or rent their home.
Here, in ascending order, are SmartAsset’s top 10 American cities where it's better to rent than own a home.
10. Boston
Boston is the capital and most populous city of the Commonwealth of Massachusetts, as well as a rent-friendly locale for thrifty homesteaders. According to the most recent U.S. Census data, the median home value was $575,200, while the median yearly rent was $19,764. Price-to-rent ratio: 29.10.
9. San Diego
Known as the “Birthplace of California,” San Diego is the state’s second-largest city, and renters can afford to live there. According to the most recent U.S. Census data, the median home value was $654,700 and the median yearly rent was $20,376. Price-to-rent ratio: 32.13.
8. Washington, D.C.
Its a good thing our national capital has an affordable rental market because elected representatives and their staff come and go, and the federal government is the city's largest employer. The median home value was $600,700 versus the median yearly rent of $18,192. Price-to-rent ratio: 33.97.
7. Seattle
The Seattle area is home base for both Amazon and Microsoft, and the city has one of the most competitive housing markets in the country. As such, Seattle, the state’s largest city, had the nation’s third-highest median home value at $758,200, while the median yearly rent was a more affordable $20,388. Price-to-rent ratio: 37.19.
6. Long Beach, Calif.
The state’s seventh-largest city is home to the RMS Queen Mary, a retired British ocean liner, but if you’re willing to rent, you can afford to call it home, too. The median home value was $600,700 and the median yearly rent was $16,140. Price-to-rent ratio: 37.22.
5. New York
Known as the Crossroads of the World, New York City beckons you to live there, but you’ll be competing with plenty of other renters if you do. The city's median home value was $645,100 versus the median rent of $17,316. Price-to-rent ratio: 37.25.
4. San Jose, Calif.
San Jose, California’s third largest city, is also known as the capital of Silicon Valley, as well as being a hot housing market. Renters will have more luck affording to live there than homebuyers, SmartAsset says. That's because the median home value was $968,500 and the median yearly rent was $25,932. Price-to-rent ratio: 37.35.
3. Los Angeles
Los Angeles is California’s largest city, as well as home to the state’s tallest building. While the Wilshire Grand Center includes a hotel, renters will have to look elsewhere to afford a home with soaring skyline views. The median home value was $682,400, while the median yearly rent was $17,688. Price-to-rent ratio: 38.58.
2. Oakland, Calif.
Oakland is California’s eighth-largest city. According to the most recent U.S. Census data, the median home value there was $717,700 and the median yearly rent was $17,976. Price-to-rent ratio: 39.93.
1. San Francisco
San Francisco is California’s fourth-largest city. The famous and the infamous of Alcatraz Island, Chinatown and Haight-Ashbury all call San Francisco home, and so can you if you rent instead of buy there. The median home value was $1,195,700 versus the median annual rent of $22,560. Price-to-rent ratio: 53.00.
The full report can be viewed here.