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In the era of inflation's return, both buying and renting can seem unaffordable. However, given each person's financial situation, there is usually one option that makes more sense, and that best option has a great deal of geographical variance. Let's delve into it here.
In order to measure the disparity between buying and renting, we'll invent a simple ratio, called months of rent to buy. What this means is that if you saved up n number of rent months, you could buy a house. For instance, if rent was $2,000, and months of rent was 100, you could buy a house for $200,000. If it was 500, a house would cost $1 million. Obviously, the lower months of rent is, the more reasonable home prices are, in a relative sense. (We're not saying they're actually reasonable!)
Before we look at the top cities, let's take a look by state.
Top 5 states with highest months of rent to buy (least affordable):
| State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|
| UT | $599,000 | $1,536 | 390 |
| MT | $540,000 | $1,452 | 373 |
| ME | $725,000 | $2,000 | 363 |
| WY | $372,000 | $1,047 | 353 |
| ND | $360,000 | $1,038 | 351 |
Three of these five are ski destinations. It could be that they're in high demand for vacation homes, but most people don't want to live there year round, meaning rentals are more affordable. But it's bad news for folks who live in the area looking to buy.
What about the most affordable states relative to rents? Let's take a look at those.
| State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|
| DE | $277,000 | $2,100 | 132 |
| PA | $220,000 | $1,473 | 150 |
| IL | $286,000 | $1,734 | 169 |
| CT | $338,000 | $2,010 | 169 |
| MI | $242,000 | $1,353 | 172 |
Honorable mention: New York, right behind Michigan.
Let's take a look at the cities with the most and the least affordable homes. Since we started out with least affordable before, let's go the opposite way this time.
| City | State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|---|
| Detroit | MI | $78,000 | $1,195 | 65 |
| Camden | NJ | $115,000 | $1,300 | 88 |
| Bonita Springs | FL | $499,000 | $5,550 | 90 |
| Lauderhill | FL | $180,000 | $1,950 | 92 |
| Hampton | VA | $132,000 | $1,397 | 94 |
And on to the most renter-advantaged cities:
| City | State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|---|
| Newport Beach | CA | $3,000,000 | $4,000 | 750 |
| Santa Barbara | CA | $3,199,000 | $4,345 | 736 |
| Palo Alto | CA | $3,053,000 | $4,468 | 683 |
| Sammamish | WA | $1,500,000 | $2,400 | 625 |
| Cupertino | CA | $2,500,000 | $4,013 | 623 |
California Dreamin' seems like it's best confined to renting. As unaffordable as those infamous California rents are, owning is well beyond the reach of most of us.
Interesting as this is, these cities are so small that it's probably not relevant to most users. As we've done before, let's set a population threshold, so the findings are likely to reach a bit more of our movers. We'll start with the five least affordable, this time only including cities with 250,000 or more residents.
Least affordable biggish cities to buy a home:
| City | State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|---|
| San Jose | CA | $1,254,000 | $3,195 | 392 |
| Reno | NV | $655,000 | $1,682 | 389 |
| Irvine | CA | $1,298,000 | $3,600 | 361 |
| Oakland | CA | $873,000 | $2,750 | 318 |
| Wichita | KS | $280,000 | $895 | 313 |
Most affordable biggish cities to buy a home:
| City | State | Median Home Price | Median Rental Price | Months of Rent to Buy |
|---|---|---|---|---|
| Detroit | MI | $78,000 | $1,195 | 65 |
| Dallas | TX | $229,000 | $2,000 | 114 |
| Chicago | IL | $337,000 | $2,775 | 121 |
| Cleveland | IL | $135,000 | $1,100 | 123 |
| Baltimore | MD | $217,000 | $1,615 | 134 |
An interesting exploration! Individual choices will be far more granular, but hopefully this informs your journey one way or the other. For more personalized recommendations, don't forget to take our quiz!