5 Cities Where It Would Take at Least 25 Years of Rent Payments To Buy a Home Outright
Written by
Terence Loose
Edited by
Molly Sullivan
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Owning a home is the classic American Dream. However, in recent times, that dream has gotten too expensive for many families, forcing them to rent, with little hope of ever buying a home. But, as a new study by real estate research company Clever found, that’s not always a bad thing. In fact, its data revealed that in 48 out of the 50 states, the cost of rent is less than monthly mortgage payments.
Of course, there are variables that make one or another better, depending on individual situations. For instance, renters enjoy few if any tax advantages, as opposed to mortgage holders. And renting gains you no real estate equity, while owning does.
On the other side, the Clever study found that homeowners get hit with many unforeseen costs. For instance, according to its data, hidden expenses of homeownership can be as high as $18,000 a year. Then there’s the time: Homeowners spend an average of 600 hours, or 25 days, a year on home repair and maintenance. Yes, renting starts to look a little better during that 150th run to Home Depot.
The Clever study included a “price-to-rent ratio,” which is calculated by dividing the median house price by the median annual rent in a city. A value of 15 or less means it is more advantageous to buy, while 21 and over means it is much better to rent. Ratios from 16 to 20 depend on the individual scenario.
Currently, nationwide the price-to-rent ratio is 14.3, according to Clever, making it slightly better to buy than rent, on average. That’s down, by the way, from 2022 and 2021, when it was 15.1 and 15.0, respectively.
But those are nationwide stats. There are many places where the ratio is much lower (Cleveland is at 11.0, for instance) and much higher. Considering that, here are five cities where it would take you at least 25 years (300 months) in rent payments to own a home — but much, much more in mortgage payments.
Salt Lake City
- Typical Home Price: $525,768
- Typical Monthly Rent: $1,710
- Months of Rent To Buy Home: 307
- Price-to-Rent Ratio: 25.6
With world-renowned hiking and skiing in its backyard, Salt Lake City is a very nice version of the American Dream. But with a typical monthly house payment of $3,107, which includes mortgage principal and interest, taxes and insurance, assuming a 20% down payment, is a hefty financial commitment. So much so that going strictly by the numbers, it’s better to rent.
Thanks!
Seattle
- Typical Home Price: $692,195
- Typical Monthly Rent: $2,230
- Months of Rent To Buy Home: 310
- Price-to-Rent Ratio: 25.9
Known for its Space Needle, beautiful waterfront, sports teams, the original Starbucks in the city’s famous Pike Place Market and so much more, Seattle has earned its spot in this top five list. But its typical housing cost of $4,245, if you buy, turns out to be a strong argument for renting.
Los Angeles
- Typical Home Price: $925,783
- Typical Monthly Rent: $2,927
- Months of Rent To Buy Home: 316
- Price-to-Rent Ratio: 26.4
Living close to the stars and the Pacific will cost you. With a typical monthly house payment of $5,558, it would cost you nearly twice as much per month to buy the typical Los Angeles home than rent it. And that’s assuming nothing breaks or needs maintenance.
San Francisco
- Typical Home Price: $1,132,315
- Typical Monthly Rent: $3,071
- Months of Rent To Buy Home: 369
- Price-to-Rent Ratio: 26.4
Many might think that the City by the Bay would top the list when it came to places to rent rather than own, and it was close. It would take the equivalent of almost 31 years of typical rent to match the sticker price of the city’s typical home. Yet, according to Clever’s price-to-rent ratio, renting is still the smart move, by a lot.
San Jose, California
- Typical Home Price: $1,502,362
- Typical Monthly Rent: $3,331
- Months of Rent To Buy Home: 451
- Price-to-Rent Ratio: 37.6
More than 37 years. That’s how long it would take monthly rent payments to match the cost of a typical San Jose home. But that still might be preferable to the shocking $8,943 per month needed for the typical house payment. Why so pricey? There are likely many factors, including the fact that it’s home to much of the tech industry, with a strong job market and international demand. Whatever the reason, it’s safe to say that you’re going to need to pull down some major cash each month, whether you buy or rent.
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