Top 30 Cities: Price to Rent & Price to Income Ratios

As something of a follow-up to September’s Big Picture Week, I thought I would post another update to the multi-city price metrics table. This time I figured I would expand the list to the top 30 so DC, Vegas, and Portland wouldn’t feel left out.

Data is current as of August 2010. Previous posts covered data from November 2009 and July 2009. For a historical comparison, hit this 2007 Fortune table (the “The P/R Ratios” tab has 15-year averages).

Rather than spending a bunch of time trying to come up with some sort of “fair” comparison that would inevitably be found lacking anyway, the table below is a straight up look at what the people in each city are actually paying to buy homes vs. what they are actually paying to rent homes.

The “price” column represents the median home sale price, the “rent” column is the median monthly rent, and “income” is the median household income. “P/R” is the median home sale price divided by the annual median rent (“rent” * 12). “P/I” is the median home sale price divided by the median household income, and “I/R” is the median household income divided by the annual median rent.

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 8,391,881 27,532 $432,300 $1,070 $51,116 33.7 8.5 4.0
Los Angeles CA 3,831,868 8,169 $423,200 $1,082 $48,882 32.6 8.7 3.8
Chicago IL 2,851,268 12,550 $189,800 $885 $46,911 17.9 4.0 4.4
Houston TX 2,257,926 3,561 $87,492 $794 $44,315 9.2 2.0 4.6
Phoenix AZ 1,601,587 3,087 $137,400 $898 $50,140 12.8 2.7 4.7
Philadelphia PA 1,547,297 11,453 $192,900 $816 $36,976 19.7 5.2 3.8
San Antonio TX 1,373,668 3,372 $76,225 $753 $42,261 8.4 1.8 4.7
San Diego CA 1,306,301 4,028 $463,500 $1,276 $62,668 30.3 7.4 4.1
Dallas TX 1,299,543 3,794 $75,000 $788 $40,796 7.9 1.8 4.3
San Jose CA 964,695 5,516 $547,100 $1,350 $80,616 33.8 6.8 5.0
Detroit MI 910,920 6,563 $20,900 $749 $28,730 2.3 0.7 3.2
San Francisco CA 815,358 17,459 $752,300 $1,294 $73,798 48.5 10.2 4.8
Jacksonville FL 813,518 1,061 $143,900 $873 $50,476 13.7 2.9 4.8
Indianapolis IN 807,584 2,212 $101,600 $717 $43,652 11.8 2.3 5.1
Austin TX 786,382 3,127 $135,800 $914 $51,372 12.4 2.6 4.7
Columbus OH 769,360 3,658 $138,200 $753 $44,369 15.3 3.1 4.9
Fort Worth TX 727,575 2,487 $84,102 $799 $48,870 8.8 1.7 5.1
Charlotte NC 709,441 2,928 $205,500 $821 $52,530 20.9 3.9 5.3
Memphis TN 676,640 2,238 $85,700 $775 $37,207 9.2 2.3 4.0
Boston MA 645,169 13,322 $395,300 $1,158 $51,688 28.4 7.6 3.7
Baltimore MD 637,418 7,889 $182,400 $843 $40,313 18.0 4.5 4.0
El Paso TX 620,447 2,491 $113,540 $617 $37,600 15.3 3.0 5.1
Seattle WA 617,334 7,361 $455,400 $964 $61,786 39.4 7.4 5.3
Denver CO 610,345 3,981 $274,400 $795 $45,831 28.7 6.0 4.8
Nashville TN 605,473 1,206 $162,700 $772 $45,587 17.6 3.6 4.9
Milwaukee WI 604,133 6,287 $118,000 $749 $37,331 13.1 3.2 4.2
Washington DC 599,657 9,766 $683,800 $1,036 $57,936 55.0 11.8 4.7
Las Vegas NV 567,641 4,327 $144,500 $1,032 $53,097 11.7 2.7 4.3
Louisville KY 566,503 1,471 $130,500 $489 $34,116 22.2 3.8 5.8
Portland OR 566,141 4,215 $285,500 $799 $50,979 29.8 5.6 5.3

Here are the weighted averages:

  • Median Home Price: $279,905
  • Median Rent: $941
  • Median Income: $48,748
  • Price to Rent: 24.8
  • Price to Income: 5.7
  • Income to Rent: 4.3

Seattle has the seventh most-expensive home prices relative to incomes, but the second-cheapest rents compared to incomes, which pushes us to third highest on the price to rent list. If you’re interested in looking at some other takes on price to rent ratios, check out recent analysis from Zillow and Trulia, and be sure to read this surprisingly insightful take on the two reports from Forbes.

Will Seattle’s price to rent ratio ever be as low as Austin? Probably not. But I’m pretty confident in saying that I don’t think our home prices (compared to rents) will stay in the same league as New York City forever, either.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

45 comments:

  1. 1

    Tim, Your Chart Proves Many Salient Points, but to Sum it Up

    #1: Seattle is a completely unaffordable metro area to live and no wonder our foreclosure rate is sky-rocketing.

  2. 2

    It’s too bad there isn’t some way of including the real property tax burden in those price ratios. I note that Texas is down in the price/x ratios, but they also have fairly high real estate taxes. I’m not sure if CA is high or low, but their cities tend to be high in those ratios. Anyway, those who buy houses on a monthly payment basis can afford to pay more in states with lower real property taxes. It would be nice to take that factor away somehow.

  3. 3
    ChrisM says:

    Am I reading this chart right??? P/I seems to indicate a ton of cities are at or below 3, which I thought was the historical norm. Granted, most are in TX and other desert hell holes (speaking as one who fled Phoenix).

    Interesting, too, that some TX cities have good P/I, but awful P/R (at least from the perspective of a renter!). Any idea what’s up w/ Fort Worth? Looks like if you’re stuck in Ft Worth you’d do pretty good to buy vs rent…

    Is use of median vs. average somehow altering the results?

  4. 4
    drshort says:

    RE: softwarengineer @ 1

    Around here, most of the foreclosure activity is outside of the immediate metro area, not in the city itself.

    And dont be fooled by the median income. It doesnt have a tight correlation to home prices — which is probably the only point that this chart proves.

  5. 5
    m-s says:

    I think I can explain at least part of Texas’ anomalous data. In Texas, regulation (normally using those two words in the same sentence is crazy) does not allow the homeowner to extract equity by an amount that, when combined with the mortgage, exceeds 80% of the value of the home. That is, until you’ve paid down the mortgage to 80%, you can’t do ANY equity extraction.
    I was amused that, during the ’90s and aughts, the banks tried furiously to get the constitution amended to eliminate this, crying “freedom to do with your house equity what you want!” every election cycle. I don’t hear that much anymore…
    This all had the effect of suppressing the insane run-up of prices, which was a bummer (then), but leads to the situation you see now.
    I’m told that this was a Depression era constitutional amendment to discourage people from getting in over their heads and falling victim to those dastardly Eastern banks with their sneaky Eastern bamboozlements. Seems to have worked.
    I’m sure other forces are at work here and contributed, but hope this helped.

  6. 6
    WestSideBilly says:

    I wish this chart included metro areas. Chicago’s city limits include a bunch of shady areas, a few nice ones, and a lot of condos. That $189k median is very unrealistic for a house shopper in the greater Chicago area. The same is true for Detroit – that $21k median (which, as a side note, is hilarious) is to live in areas of the city that few people want to be in. A house in the ‘burbs is quite a bit more expensive.

  7. 7
    robotslave says:

    RE: WestSideBilly @ 6 – And the NYC prices listed are side-splitting for anyone looking for a “nice” property or rental in a “safe” part of town.

    The data for all of the cities include the neighborhoods that financially secure white people don’t want to live in. Some cities do have more undesirable brown people than other cities, and some have crappier buildings than others. If you only want to compare good clean homes in mostly white neighborhoods, you’ll need to find a different data source, or figure out some way to extract what you want from what we’ve got here.

  8. 8
    patient says:

    Didn’t you get the memo Tim? Seattle is a superstar world class city. I’m surprised we aren’t at the very top, it must be due to a flaky data source.

  9. 9
    Kooter says:

    RE: robotslave @ 7 – Wow….maybe you can check the Klan’s website to find your “white” “clean” non-brown neighborhoods. Unfortunately for you, large metropolitan areas such as those above are a diverse patchwork of color, income and social status. Good luck in the hunt for your white utopia and watch out for the scary, undesirable brown folks.

  10. 10
    robotslave says:

    RE: Kooter @ 9 – I see someone needs the big red sarcasm sign; let me go drag that out of the basement.

  11. 11
    Kooter says:

    RE: robotslave @ 10 – Sorry about that….it didn’t read as sarcastic to me. I was having a discussion elsewhere this morning and his argument was almost word for word the same as yours…but he was not being sarcastic at all

  12. 12
    robotslave says:

    RE: Kooter @ 11 – No worries, Koot. I was a bit miffed there with Billy saying those things about the Chicago market when a) Chicago is one of the more racially segregated cities (or greater metro areas) in the country, and b) Billy blithely suggests that all those low house prices inside the city dirty up the real, actual numbers to the point where they’re “unrealistic” for him and shoppers like him.

  13. 13
    patient says:

    Yeah robotslave, poor choice of sarcasm. I found it offensive and I’m white.

  14. 14
    robotslave says:

    RE: patient @ 13 – Well, it was meant to be offensive to certain white people…

    I didn’t think it needed to be pointed out, but the sort of white people who have issues with brown people do not use the phrase “brown people”, and more often than not don’t make reference to race at all, preferring a panoply of racially coded proxies, e.g. “welfare”, “gangs”, “baggy trousers”, “housing projects”, “anchor babies”, “hanging out on street corners”, “inner city”, etc.

  15. 15

    RE: robotslave @ 14
    There is a Flipside Too

    When was “Whitey” or “Gringo” considered politically incorrect terms?

    Do the Europeans have a month during the year celebrating their ethnic group?

    I think the far left is way too thin skinned for rationale talk on this subject, albeit I’ve brought these topics up at EEO meetings and the ethnic groups agreed with me. The problem in a nut shell is no one is gonna get empathetic to anyones’ ethnic group if it isn’t handled on a flat table.

    Perhaps the answer is eliminate the whole game and just celebrate Independence Day as a “Melting Pot American Nation” altogether and stop trying to highlight or over-protect any ethnic group in America, period.

  16. 16
    Lurker says:

    terrorist babies destroyed my property value

  17. 17
    robotslave says:

    RE: softwarengineer @ 15 – I think the critique of “color blind” policy was fleshed out at least 40 years ago, but if you don’t believe in systemic or structural racism, then none of the long-established arguments are going to sway you, let alone the more recent po-mo stuff.

    Which has precious little to do with the topic at hand. My apologies, Tim, I just meant to throw out a snarky comment, not hijack your post.

  18. 18
    D. in Ballard says:

    RE: softwarengineer @ 15 – Oh I think I’d get in pretty big trouble at work if I tried using the word whitey or gringo.

  19. 19
    doug says:

    I don’t know of any place you can rent below $1000 that isn’t an absolute pit, or 500 sq ft. in Seattle (or the Eastside for that matter). I live on the Eastside, and my rent was raised from $950 to $1200 this year. (with many, many empty units. Great business strategy.)

    Still, housing remains overpriced in Seattle. Which is why I’m buying a house in mill Creek.

  20. 20
    Dirty_Renter says:

    By D. in Ballard @ 18:

    RE: softwarengineer @ 15 – Oh I think I’d get in pretty big trouble at work if I tried using the word whitey or gringo.

    What about ‘dirty renter’?

  21. 21
    racket says:

    Really???

    Where can you rent a house that would cost $450,000 in todays market for $964.00????

    I’d like to know, I can rent our the chocolate box that I am living in now for more than that, then rent this $964.00 a month $450,000 house.

    These charts are always rubbish.

  22. 22
    alex says:

    RE: racket @ 21RE: racket @ 21

    Good point – that 450k house rents for much more than $964.00 in Seattle.

    This doesn’t mean the chart is rubbish, though. It just means that houses people rent out are much lower quality (and lower in value) than the houses people buy to live in.

    To bring it home: you rent a “chocolate box” so that you can save up every month to be able to later buy that 450k house.

  23. 23
    The Tim says:

    By racket @ 21:

    Really???

    Where can you rent a house that would cost $450,000 in todays market for $964.00????

    That’s not what this table is meant to represent, and I was very clear about that up front:

    Rather than spending a bunch of time trying to come up with some sort of “fair” comparison that would inevitably be found lacking anyway, the table below is a straight up look at what the people in each city are actually paying to buy homes vs. what they are actually paying to rent homes.

    I’m comparing the pool of homes that are being rented vs. the different pool of homes that are being purchased.

  24. 24

    RE: The Tim @ 23 – I would question whether your rental number includes apartments. Seems pretty clear the house median does not. If so, it would be two different groupings.

  25. 25
    Cheap South says:

    RE: racket @ 21

    I would assume that “rent” units are mostly (in any city) studios, 1 or 2 bedroom apartments; SFH that most users here seem to be looking for, are a small percentage of the rental market. So it makes perfect sense that the median is $964; but very few here want or can fit in those places.

    There are plenty of $950-$1200 2 bedroom apartments close to excellent schools. And, no, I won’t give examples. Find the zip code of the school you want, and then type it in Rent.com.

  26. 26
    deejayoh says:

    I am surprised that rents in NYC are less than SF and only $100 per month more than Seattle.

    I found this report on rent vs. owning costs in the top 100 MSA’s and by their calculations Seattle is 13th most unfavorable cost comparison

    http://www.cepr.net/documents/publications/right-to-rent-2010-9.pdf

  27. 27
    drshort says:

    RE: deejayoh @ 26

    Rent control?

  28. 28
    m-s says:

    Another thing, Tim could’ve done the standard deviations of P/I and I/R, but the spread of I/R is only a factor of 1.8 from lowest to highest, whereas P/I is a whopping 16. Rent seems to be a stable “what the market will bear” thing (its competitive) whereas price looks to be whacko, and subject to influences like I alluded to in Texas. I think Tim’s big picture stuff kind of bore that out.

  29. 29
    Jonness says:

    By drshort @ 4:

    RE: softwarengineer @ 1

    Around here, most of the foreclosure activity is outside of the immediate metro area, not in the city itself.

    It’s normal for the epidemic to spread from the outside in. But that doesn’t mean the inside is perfectly immune to what’s spreading.

    And dont be fooled by the median income. It doesnt have a tight correlation to home prices — which is probably the only point that this chart proves.

    The chart proves RE is local, but it doesn’t prove historical price to median income is not a good measure of affordability when a specific area is viewed over time.

  30. 30
    Francesc Fabregas says:

    You have Seattle’s population density as per sq km, where you have all the other cities (at least most) listed per sq mile. Based on your population number, you might want to change Seattle’s density to 7, 361.

  31. 31
    The Tim says:

    RE: Francesc Fabregas @ 30 – Oops, you’re right. Sorry about that. Fixed.

  32. 32
    Cheap South says:

    RE: Francesc Fabregas @ 30

    Ah, looking for similar weather as London?

  33. 33

    RE: drshort @ 4

    Medium Incomes?

    Household incomes in states [like Wash St] where a segment of top 1% incomes [no real effect on foreclosure rates] draws up the avg household incomes is meaningless.

    To get to the real medium incomes, throw the top 1-5% out….they either don’t count or already own a home and are hoarding money [not buying real estate] for the economic uncertainties ahead of us.

    Then you’ll find that the Seattle metro area is like $50K per household avg [the real medium income applied to real estate buyers].

    Of course the foreclosure rate in Seattle city limits is lower….the owners are either old with no mortgages or the top 1-5% of Wash St incomes. Who else can afford to live there?

  34. 34

    RE: softwarengineer @ 33 – I sort of doubt that throwing out the top 5% of earners would have that much effect on the median income, as opposed to the mean.

    But if you’re looking at home sales, why would you throw out the top? They’re in the housing market one way or another. It’s the bottom 30% or more that are probably irrelevant to housing.

  35. 35

    RE: Kary L. Krismer @ 34

    The Top 1% “At Least” Make 10 Times the Household Pay of the Bottom 50%

    Bill Gates’ wealth is at $60B, his wealth is equivalent to a million $60K incomes in Wash St.

    Believe me, with stock capital gains as income [and they are]; the top 1-5% totally skew the avg household income numbers.

    http://findarticles.com/p/articles/mi_m1318/is_1_55/ai_68147472/

  36. 36
    Drone says:

    By softwarengineer @ 35:

    Bill Gates’ wealth is at $60B, his wealth is equivalent to a million $60K incomes in Wash St.

    Remember that wealth and income are not the same. Bill may have a lot of money, but he’s not earning a new $60B every year.

  37. 37

    RE: softwarengineer @ 35 – But not the median. Not to insult you, but you’re thinking like Ardell! ;-)

    What I had to explain to Ardell about a year ago was that removing a five $3,000,000 sales in a month won’t likely affect the median even a dollar. It would affect the mean.

  38. 38

    RE: Kary L. Krismer @ 37

    I Acknowledge Where You’re Coming From

    Its somewhere on the web, but there was an article on just this subject I pulled for SB a few years ago that agreed with my present viewpoint and blamed a lot of the avg household income skewing on MSFT capital gains income in this state.

  39. 39

    RE: Drone @ 36

    Even if his yearly income is 5-10% of $60B

    50,000-100,000 $60K incomes is a major statistical footprint impact.

  40. 40
    GrizzlyBear says:

    This chart leads me to but one conclusion: there is still A LOT of pain in store insofar as price declines are concerned. This is going to drag on years and years.

  41. 41
    racket says:

    “This chart leads me to but one conclusion: there is still A LOT of pain in store insofar as price declines are concerned. This is going to drag on years and years.”

    How so? Because you can rent a “median” apartment for less than a mortgage.

    The only real barometer is when you have 2 houses side by side, and one is renting for significantly less than the other paying a mortgage on.

    In my neighborhood the quality of the rental offerings is way sub bar compared the the owner occupied homes.

  42. 42
    WestSideBilly says:

    By robotslave @ 12:

    RE: Kooter @ 11 – No worries, Koot. I was a bit miffed there with Billy saying those things about the Chicago market when a) Chicago is one of the more racially segregated cities (or greater metro areas) in the country, and b) Billy blithely suggests that all those low house prices inside the city dirty up the real, actual numbers to the point where they’re “unrealistic” for him and shoppers like him.

    Chicago is very segregated (though not as bad as Detroit is now) but that has nothing to do with what I was saying. Chicago proper actually has a bunch of very nice areas where affluent people (not just whites) want to live – but they’re heavy in condos and light in houses. Lake View has a lot of very large houses that have been converted into 3-unit or 4-unit condos (and sell for a lot more than $189k). Gold Coast and MagMile have a slew of expensive properties – mostly condos. In a lot of places you buy a condo because you can’t afford a house; in Chicago you buy a condo if you want to be close to the city even though a house further out is cheaper. It’s similar to Belltown/Capitol Hill but on a much larger scale.

    Condos account for about half the Chicago market and have a median more like $250k, and if those are being excluded, I think this chart is showing a skewed result for some cities. In Chicago if you add condos, the median goes up. In Seattle, the median goes down. That’s my point. If you include the near suburbs, you get a better picture of what a house buyer is going to be looking at.

  43. 43
    Jonness says:

    By Kary L. Krismer @ 34:

    But if you’re looking at home sales, why would you throw out the top? They’re in the housing market one way or another. It’s the bottom 30% or more that are probably irrelevant to housing.

    If they pay rent, they count. Most successful investors base the amount they are willing to pay for a rental on the amount they can rent it out for. The amount the tenants can afford to pay in rent is based on the amount they earn per month.

    It’s important to analyze the entire housing market and all that contributes to it. Those who try to isolate portions of the big picture in order to better understand them, often inadvertently fracture the model and begin to focus on analyzing the small picture without ever reassembling the pieces.

  44. 44
    wreckingbull says:

    RE: Jonness @ 43 – Not just successful investors. Using P/E to calculate a home price, even if you never plan to rent it out, is still the best way to reliably price a home in my opinion.

  45. 45

    […] the top 31, since Las Vegas got ousted from #30 by Oklahoma City the last time I did this list (in late 2010). Also of note: Detroit’s ongoing dramatic decline in population caused it to fall from the […]

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