J.D. Roth over at Get Rich Slowly put up a post Wednesday about renting vs. buying, sort of a follow-up to my 2007 post over there. In it, he said that he couldn’t find any info on current price-to-rent ratios around the country, so I thought I would update the list I put up back in September with some more up-to-date information.
This time I was able to locate sold price info for Texas and Indiana, so the list below is the complete set of price, rent, and income data for the 25 largest cities in the US by population. Data is current as of November 2009. For a historical comparison, hit this 2007 Fortune table (the “The P/R Ratios” tab has 15-year averages).
Also, if you’re just interested in how things look around the Seattle area, hit this October post that breaks down seven neighborhoods in the area (note that the method used in that post is different than the one used to compile the table below).
Note that the “P/R” column is the median price divided by the median rent over the course of a full year, which is the “Rent” column times twelve.
Click on any column header to sort by that column.
| City | State | Pop. | Density | Price | Rent | Income | P/R | P/I | I/R |
|---|---|---|---|---|---|---|---|---|---|
| New York | NY | 8,363,710 | 27,440 | $477,900 | $1,013 | $50,094 | 39.3 | 9.5 | 4.1 |
| Los Angeles | CA | 3,833,995 | 8,205 | $407,900 | $1,024 | $47,904 | 33.2 | 8.5 | 3.9 |
| Chicago | IL | 2,853,114 | 12,649 | $234,100 | $837 | $45,973 | 23.3 | 5.1 | 4.6 |
| Houston | TX | 2,242,193 | 3,828 | $75,000 | $752 | $43,429 | 8.3 | 1.7 | 4.8 |
| Phoenix | AZ | 1,567,924 | 2,938 | $141,300 | $850 | $49,137 | 13.9 | 2.9 | 4.8 |
| Philadelphia | PA | 1,447,395 | 10,721 | $144,800 | $772 | $36,236 | 15.6 | 4.0 | 3.9 |
| San Antonio | TX | 1,351,305 | 2,809 | $81,098 | $713 | $41,416 | 9.5 | 2.0 | 4.8 |
| Dallas | TX | 1,279,910 | 1,427 | $80,000 | $746 | $39,980 | 8.9 | 2.0 | 4.5 |
| San Diego | CA | 1,279,329 | 1,612 | $380,000 | $1,208 | $61,415 | 26.2 | 6.2 | 4.2 |
| San Jose | CA | 948,279 | 2,223 | $468,400 | $1,277 | $79,004 | 30.6 | 5.9 | 5.2 |
| Detroit | MI | 912,062 | 6,378 | $25,300 | $709 | $28,155 | 3.0 | 0.9 | 3.3 |
| San Francisco | CA | 808,976 | 17,323 | $716,700 | $1,224 | $72,322 | 48.8 | 9.9 | 4.9 |
| Jacksonville | FL | 807,815 | 1,062 | $140,800 | $826 | $49,466 | 14.2 | 2.8 | 5.0 |
| Indianapolis | IN | 798,382 | 2,152 | $76,948 | $678 | $42,779 | 9.5 | 1.8 | 5.3 |
| Austin | TX | 757,688 | 2,396 | $121,263 | $865 | $50,345 | 11.7 | 2.4 | 4.8 |
| Columbus | OH | 754,885 | 3,556 | $128,200 | $713 | $43,482 | 15.0 | 2.9 | 5.1 |
| Fort Worth | TX | 703,073 | 1,828 | $80,000 | $756 | $47,893 | 8.8 | 1.7 | 5.3 |
| Charlotte | NC | 687,456 | 2,516 | $161,800 | $777 | $51,479 | 17.4 | 3.1 | 5.5 |
| Memphis | TN | 669,651 | 2,327 | $115,100 | $733 | $36,463 | 13.1 | 3.2 | 4.1 |
| Baltimore | MD | 636,919 | 7,889 | $159,100 | $797 | $39,507 | 16.6 | 4.0 | 4.1 |
| El Paso | TX | 613,190 | 2,447 | $96,000 | $584 | $36,848 | 13.7 | 2.6 | 5.3 |
| Boston | MA | 609,023 | 12,561 | $327,300 | $1,096 | $50,654 | 24.9 | 6.5 | 3.9 |
| Milwaukee | WI | 604,477 | 6,296 | $128,600 | $709 | $36,584 | 15.1 | 3.5 | 4.3 |
| Denver | CO | 598,707 | 3,905 | $216,800 | $753 | $44,914 | 24.0 | 4.8 | 5.0 |
| Seattle | WA | 598,541 | 7,179 | $377,300 | $912 | $60,550 | 34.5 | 6.2 | 5.0 |
Also, I pointed this out in our mid-week open thread, but thought it was worth mentioning here as well. I find it fascinating what a telling indicator it is of just how much the general mindset about home ownership has changed when you compare the comments on my 2007 post over at Get Rich Slowly and J.D.’s follow-up from Wednesday.
A selection of comments from each post…
2007:
- This is one of the worst pieces of financial advice I have ever seen. Yes, if you want to get poor slowly, by all means rent instead of buy.
- House values also increase over time. A renter gets no benefit from this.
- I hate it when PF Blogs let someone post about how renting isn’t such a bad deal. Renting sucks. How much do the renters benefit when property values rise? They don’t.
- All else being equal, when you rent you’re paying the mortgage, utilities, repairs, etc… AND the landlord is making a profit.
- Debt is not always bad – it can work as a multiplier for your financial leverage, and at least when buying a house, you’ll probably get a return.
2010:
- A lot of the time I wish we were still renting.
- I’ve done both, and am currently stuck with a house I am renting because it won’t sell. I probably won’t buy again.
- I appreciate this. I rent, I plan to keep renting for a long time, and I get very tired of friends and coworkers giving the whole “throwing your money away” crap.
- I came pretty close to buying a few times before I figured this out, and I’m really glad that I didn’t. I don’t envy any of my friends who are upside down on their mortgages and stuck wherever they are, but even ignoring the bubble/burst effect, ownership isn’t always that great of a deal over the long haul.
- I really appreciate how much money I save by renting in just time usage alone.
- This is a great article. Thank you for the insight. I’ve read several articles on this topic but this is the best one I’ve seen.
What a difference two and a half years makes.
00
RE: The Tim @ 100 –
You can put together any set of numbers and you will see the trend. Are you comparing rent in general (condo, appartment, SFR) to buying a property? Or you comparing renting a house vs buying a house? There is a way of properly analyse the numbers and you are not doing. Compare rent per square foot with price sold per square foot. Apples to apples. Otherwise your numbers are junk.
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RE: 2kt @ 101 – “There is a way of properly analyse the numbers and you are not doing.”
“Otherwise your numbers are junk.”
There is a proper way to prove “numbers are junk,” or that the analysis does not support claims made. Suggesting, “Compare rent per square foot with price sold per square foot. Apples to apples.” is probably not going to be considered a great proof by many that there is no value in the data set presented. Maybe you could prove a lack of correlation to anything? Alternatively, maybe you could provide a much better analysis?
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The post claims that Seattle’s rent to price ratio is near 34. The real number is 20 to 25.
I gave you price per square foot for the area, $180-$250 per sqf for sold properties. You want it sourced, sure. http://www.altosresearch.com/, help yourself.
For rents, go to Craigslist.org. Homes rent $.80 to $1 sqf/mo (lower price range closer to $1 sqf/mo, or even more for very small homes). Appartments, $1.50 to $2 per sqf/mo (for low sqf rentals higher range, for larger, lower). Multiply those numbers by 12 for both. You can not come to Price to Rent multiple of 30 even.
Are you interested in defending Tim’s numbers? Give me some properties with such multiples, I don’t see them.
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RE: 2kt @ 103 – Here is the claim that I read, “The numbers in the post are not comparing the cost to buy vs. the cost to rent the same exact properties, nor do they purport to. The numbers are the median sale price and the median rental price. Obviously the mix of homes being sold are different than the mix of homes being rented. That is true for every city on the list. The point is to look at this ratio over the long term and compare a city’s current ratio to what it has been long-term in the past.”
http://seattlebubble.com/blog/2010/01/29/top-25-cities-price-to-rent-and-price-to-income-ratios/#comment-93170
Maybe you are looking for something other than what is presented here? That’s fine, but that does not mean a blue car has no value because you are looking for a red pickup.
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RE: 2kt @ 103 –
I think you’re stuck on the numbers and missing the point. Tim was never saying that the price to rent ratio for the same house was 34, just that the median priced home sale price to the median priced rental was 34. Yes, your numbers seem to be right on, but all of the other cities also followed the exact same formula. Dumpy studio apartments are going to be included in figuring the median for rentals, and mansions are going to be included in the home price median. What the data shows is that Seattle’s price to rent ratio appears to be the 3rd highest in the country. Is it possible that Seattle’s standing would be far different if only single family rental homes of similar homes were used, and only in the same neighborhoods as those for sale?
I suppose it could. But I think what the Tim was trying to convey was that the sale price to rent ratio in Seattle was higher than most cities, and I think that would remain true no matter how you figured it.
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Garbage in, garbage out.
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RE: 2kt @ 106 – Claim Jumper?
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When one works with any set of numbers, in the end one should look at his results and see whether those results are validated by the marketplace. This simple exersize confirms the integrity of the data input.
Find me one property priced at median $377K that can be rented for $912, just one, Ira.
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RE: 2kt @ 108 – Once more: That’s not the claim being made.
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By 2kt @ 103:
http://www.redfin.com/WA/Seattle/1000-1st-Ave-98104/unit-1901/home/12091755
Unit 2101 rented for 5k
Unit 1501 rented for 4k
Don’t forget to factor in an extra $2200/mo for HOA and taxes on top of the purchase price.
Plenty more where that came from.
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AMS:
When I see data input that is obviously erroneous, I don’t really care what claim is being made by it. Feel free to do otherwise.
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EconE: you are reaching, pal.
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RE: 2kt @ 111 – Let’s get specific: Do you doubt the median price or the median rent, or both?
How far off do you think the median price is being misrepresented? Same question for rent.
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RE: 2kt @ 112 –
You asked for one.
I produced.
They’re a dime a dozen.
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Rentals are mostly apparments, median property sold consists of more homes than condos, so you have some conflict here to start with. Median $377K house (as known in this area) rents approximately at $1,200 to $1500.
Median rental unit renting for $912 is likely 500-650 sqf appartment. It’s been a while since I have seen a house rented for $912. I guess there may be some, but you may need to apply for a gun permit along with your rental application and I doubt it would be worth more than $200K.
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RE: EconE @ 114 –
I asked Ira to produce one house renting at $912 that sold at $377K. You produced the one with asking price price of $1.8 million. Dude?
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RE: 2kt @ 115 – What are you saying? Are you saying The Tim misrepresented the Median Price or Median Rent?
Just tell me, what is the median price? What is the median rent?
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RE: 2kt @ 116 – You are getting a little loonier with each post. Let me remind you, specifically, what you requested:
“Are you interested in defending Tim’s numbers? Give me some properties with such multiples, I don’t see them.”
http://seattlebubble.com/blog/2010/01/29/top-25-cities-price-to-rent-and-price-to-income-ratios/#comment-93177
Where does it say that you are only asking Ira?
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The rent number is too low.
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AMS, you got a mirror, dude? This is my post to Ira, below.
108. 2kt » Jan 30, 2010 at 5:00 pm
When one works with any set of numbers, in the end one should look at his results and see whether those results are validated by the marketplace. This simple exersize confirms the integrity of the data input.
Find me one property priced at median $377K that can be rented for $912, just one, Ira.
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RE: 2kt @ 116 –
We’re never going to agree here. Obviously I can’t produce a home that sold for 377,000 that rented for 912. Nothing in this data suggested, even remotely, that one could. In fact it is quite clearly stated that these are not the same properties being compared.
2kt: Show me where the data states that the price to rent ratio for comparable homes is 34.
You’re asking me to demonstrate to you something that is patently absurd.
You made a very good point in clarifying that these are not the same properties being compared, and that the price to rent ratio for comparable properties is probably 20-25. It was a good point and I’m glad you made it. At the same time I don’t see the data as worthless and you do.
You made your point, and it was a good one, and now you’re starting to come off as some kind of psycho.
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RE: 2kt @ 120 – Did you notice that EconE was replying to your open question in message #103, not your request of Ira in #108?
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I suppose there is some value in some random numbers that don’t make sense and don’t add up in the market place. I conceed that much. As I mentioned earlier, you can always see the trend from any consistently used set of numbers.
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The point is that the chart makes no sense and yet it generated over 100 comments. Not only that, it’s a heated discussion, almost hostile.
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By WifeNeedsAHouse @ 89:
Sell a lot of houses in 2006 – 2007 did you? That’s probably what gave you the superiority complex. I’m guessing your clients through that period probably think a lot less of you now than they did back then. I suspect the next few years will begin to make you feel similar. Only time will tell :)
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“But for the record and since some of you aren’t so quick to pick up on tone, no I am not a realtor.”
Who cares? One minute you claim you are, and the next you claim you aren’t. You speak in a condescending manner and group everyone into a single stereotype. Then you wonder why you are accused of having some sort of hidden agenda?
IMO, you are correct. You were simply stimulating discussion. I believe you did a good job of that, so your hidden agenda (stirring trouble by insulting others, many of who haven’t even posted in this thread) has been well served.
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some of yall should start IM’ing or something, this was a tedious thread, and look, now I made it even more tedious.
( im only half serious, I just cant sleep)
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RE: Jonness @ 126 – I should have put a (rolls eyes) or something after the comment when I said I was a realtor. I did not intend to be condescending so if that’s how it came off I apologize. I AM NOT A REALTOR. I simply was suggesting that it’s *possible* that the bubble is near deflated, even though prices are not back to 3 times income. This has been commonly suggested as the ‘fair’ price around here, and I was suggesting that maybe prices will never drop back to 3 times income, based on this being a desirable area. I was quickly jumped on so I felt i needed to clarify/defend myself and my tone turned harsh only at that point. Sorry that took about 15 posts! lol I don’t know why everyone around here assumes everyone else has a hidden agenda (as if a bubblehead is really gonna turn around and buy just because some realtor made a post on this site), but that is what led to my wordiness in this thread, since I need to qualify every possible way my statements could be interpreted to get a contrarian point across. If no one jumps on me, and maybe just discusses the topic as I was trying to do, this thread is much shorter.
Look at the open thread… even Tim is near buying! If that doesn’t support what I was trying to say, I don’t know what can penetrate some of the thick bubble heads. Go ahead and keep dreaming of prices at 3 times income here.
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Check out this article about the Bancor, which is being discussed in some financial news media as the possible new world reserve currency to replace the US dollar –
http://www.marketoracle.co.uk/Article16870.html (bottom of page)
This article also mentions something about hiding inflation behind the numbers, which might explain the latest GDP numbers…
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RE: WifeNeedsAHouse @ 128 –
I’ll agree with you on a couple of points.
It’s pretty unlikely that the median price of a Seattle area home is going to decline to 3x the median income. That doesn’t mean that prices won’t decline further, and it doesn’t mean that there aren’t nice houses for sale out there that are 3X your income ( i.e if you make 120k per year, there are nice 360k houses out there). And just because you qualify for a loan of a certain amount, it makes a lot of sense to spend much less than that amount.
I agree that it’s also possible that the bubble is near deflated. Personally, i think we’ve got more dropping to do, that it’s not nearly as deflated as it’s going to be, but it appears to me as though we’re not going to see declines anywhere near the significance that we’ve already seen
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RE: Ira Sacharoff @ 130 – There is the possibility that prices will go down for many years but slow enough that it does not matter to the buyer. Cars go down in value, and plenty of people buy cars within their financial means.
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[...] and price-to-rent ratios. In America’s priciest market, New York City, the price-to-income ratio stood at 9.5:1 and price-to-rent ratio at 39:1 as of November 2009. In Beijing, the price-to-income [...]
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