Renting is Cheaper Than Buying in San Jose

SANTA CLARA — San Jose is ranked the No. 1 metro area for renters according to a study by Realtor.com. That’s no surprise since the median home price in the region is about $1.2 million.

But nationwide, despite double-digit increases in home prices and a record low number of homes for sale, buying is becoming more affordable in a growing number of the nation’s largest cities, according to a buy versus rent analysis released by realtor.com.

The analysis, which compared the monthly cost of buying a median priced home to the median price of renting a two- to four-bedroom unit in each of the top 50 markets in January 2021, found buying cost the same or was cheaper in 15 of the nation’s 50 largest metros, up from 13 a year ago. Moreover, nine other markets were within 5% of flipping in favor of buying — AtlantaOrlando, Fla.Birmingham, Ala.PhoenixBuffalo, N.Y.Memphis, Tenn.Washington, D.C.Las Vegas and Milwaukee.

“There isn’t a one-size-fits-all answer to the question of whether it makes more sense to buy than rent. However, this is encouraging news for the millions of millennials who are approaching peak homebuying age and may be considering shopping for a home this spring,” said realtor.com® Chief Economist Danielle Hale. “With interest rates expected to rise over the coming months, buyers may need to act sooner rather than later to take advantage of today’s affordability or be prepared to adjust their target purchase price.”

Thanks to historically low interest rates, the monthly cost to purchase the median price home in the U.S. increased a mere 0.2% year-over-year to $1,988, despite the double-digit growth in home prices. The cost to rent was up 2.4% to $1,727.

On average, buying the median priced home accounted for 32% of a metro’s median income, just slightly above the upper limit of the budgeting rule of thumb of spending 30% of gross income on housing costs. The cost to rent accounted for 27%.

Below average listing prices made it more affordable to buy
In the top 10 metros that favored buying over renting — ClevelandChicagoPittsburghRiverside, CAMiamiNew OrleansBaltimoreTampa, Fla.Hartford, and Detroit —  the median listing price of a home averaged 7.7% lower than January’s national median listing price of $346,000, while rents were 0.7% greater than the top-50 average. The monthly cost of buying in these metros dropped 0.2% compared to last year, while rents have risen 4.9% during that same period. The end result is that those who buy in these metros are able to save an average of 11% of their monthly costs compared to renters.

Markets that Favor Buying

Rank

Metro

Median Listing
Price

Buy (monthly)

Rent

Buy
Percent
of
Income

Rent Percent of Income

1

Cleveland-Elyria, Ohio

$198,000

$967

$1,195

19%

23%

2

Chicago-Naperville-Elgin, Ill.-Ind.-Wis.

$338,000

$1,691

$1,975

26%

31%

3

Pittsburgh, Pa.

$245,000

$1,250

$1,445

23%

27%

4

Riverside-San Bernardino-Ontario, Calif.

$485,000

$2,224

$2,536

37%

43%

5

Miami-Fort Lauderdale-West Palm Beach,
Fla.

$400,000

$2,092

$2,350

40%

45%

6

New Orleans-Metairie, La.

$320,000

$1,401

$1,545

31%

35%

7

Baltimore-Columbia-Towson, Md.

$325,000

$1,561

$1,693

21%

23%

8

Tampa-St. Petersburg-Clearwater, Fla.

$302,000

$1,494

$1,605

30%

32%

9

Hartford-West Hartford-East Hartford,
Conn.

$303,000

$1,589

$1,700

23%

25%

10

Detroit-Warren-Dearborn, Mich.

$265,000

$1,277

$1,350

23%

25%

11

St. Louis, Mo.-Ill.

$250,000

$1,167

$1,209

20%

21%

12

Philadelphia-Camden-Wilmington, Pa.-
N.J.-Del.-Md.

$328,000

$1,752

$1,800

28%

29%

13

Minneapolis-St. Paul-Bloomington, Minn.-
Wis.

$370,000

$1,681

$1,705

23%

24%

14

Louisville/Jefferson County, Ky.-Ind.

$250,000

$1,085

$1,100

20%

20%

15

Indianapolis-Carmel-Anderson, Ind.

$279,000

$1,190

$1,199

22%

22%

Remote work opportunities tip the scale in favor of renting in tech markets
With working from home becoming a more viable option for many, the nation’s largest tech hubs have seen rents plummet in recent months as residents have chosen to leave urban centers for more affordable options elsewhere. The trend has widened the gap between renting and buying  in tech hubs like San Jose, Calif.SacramentoSeattle and Los Angeles, where those who choose to rent saved an average of 30% in monthly costs compared to those who buy.

Top Markets that Favor Renting

Rank

Metro

Median Listing Price

Buy (monthly)

Rent

Buy Percent of Income

Rent Percent of Income

1

San Jose-Sunnyvale-Santa Clara, Calif.

$1,199,000

$5,548

$3,200

49%

28%

2

Austin-Round Rock, Texas

$460,000

$2,467

$1,615

35%

23%

3

Sacramento–Roseville–Arden-Arcade,
Calif.

$599,000

$2,639

$1,810

40%

27%

4

Seattle-Tacoma-Bellevue, Wash.

$665,000

$2,975

$2,067

37%

26%

5

San Francisco-Oakland-Hayward, Calif.

$990,000

$4,660

$3,278

47%

33%

6

Los Angeles-Long Beach-Anaheim, Calif.

$1,150,000

$4,875

$3,433

73%

52%

7

San Diego-Carlsbad, Calif.

$850,000

$3,775

$2,675

53%

37%

8

Portland-Vancouver-Hillsboro, Ore.-Wash.

$525,000

$2,382

$1,695

34%

24%

9

Oklahoma City, Okla.

$278,000

$1,259

$945

25%

19%

10

Richmond, Va.

$388,000

$1,671

$1,300

27%

21%

Methodology: Purchase and rent costs reflect current costs and do not take into account holding period, price and rent appreciation, and inflation. Purchase costs are based on purchasing with a 30-year fixed-rate, fully amortizing mortgage of 80% (20% down payment), and do include taxes and insurance and are calculated based on realtor.com metro-level residential listing price data and mortgage rate data for January 2021. Rental prices include data from apartment communities as well as private rentals (condos, townhomes, single-family homes) listed on realtor.com. All units were two- to four -bedrooms in size so as to be somewhat comparable to the typical home purchase. Household income data is from 2021 Claritas estimates are based on Census data. Only the 50 largest metros (ranked by number of households) were included in this analysis.