This Number Tells You Whether You Should Buy Or Rent Your Home

Should you buy your home or rent it? The Economix blog says one good way to figure that out is to look at your area’s “rent ratio.” That’s the cost of a typical home vs renting it. A general rule is that if that number is less than 15, you should buy. If it’s over 20, you should rent. Here’s a look at the rent ratios for some top metro areas:

Austin, TX. 20.5
Chicago 16.6
Denver 22.6
Detroit 12.4
Los Angeles 15.4
Manhattan 26.7
Miami 15.6

What’s your area’s rent ratio? Does knowing it change your plans to rent or buy?

Buy vs. Rent: An Update [economix.blogs.nytimes]


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  1. Mpowered says:

    Manhattan’s 26.7 only goes up as you go higher in price.

  2. Hi_Hello says:

    hahaha, that’s funny. what if you live near two cities. one has less than 15 the other has 16? move to the rent and buy or stay at the 16… what do to with 16??

    I move around a lot so I rent. I haven’t found a place I can see myself living there for more than a year. So I don’t buy.

    • yasth says:

      You can calculate it yourself it is just the cost of owning / annual cost of renting pre realtor fees, but post immediate fixing up. Of course the ratio given assumes 7 years ownership, and fiddling with that moves the cut off up and down massively

      • Awesome McAwesomeness says:

        Does it take into account repairs, updating, and other home maintenance? For us, owning looked awesome on paper. We had th down payment, the costs were manageable, but once we got in, we found that we were having frequent repairs, especially plumbing. We had a storm and had to get a new roof (which insurance does not cover every penny of.) We also had to get a new fence after 5 years ($5000), a new A/C unit–inside and out, etc… Then the time it took to maintain the lawn, keep the outside looking nice, etc.. was extensive. The house was in good shape when we bought it too. I am just thankful that it had a good foundation and we never got termites.

        When it came down to it, owning a home cost far more than it appeared it would on paper. We live in an area with a lower number on the list. It really did seem to make sense, but it pretty much broke us, and we bought way less than what we were approved for. We finally sold it and live in a luxury apartment with less space for more money. But, overall, it costs us less and we are happier.

        We may buy later when we are 15 years from retirement. We will get in something brand new, zero lot line or a condo, smaller, and finance for 15 years. That way, it will be paid for at retirement, we won’t be stuck in an old decaying house that is falling down around us when we are older and it will be something we can handle.

        • Bibliovore says:

          I’m sorry you had such a bad homeowning experience — that must have been really frustrating.

          When we decided to buy a house, we were given a recommendation to annually budget 1% of the total purchase price toward upkeep/maintenance/repairs. We figured that in as a monthly expense when calculating our budget and what we could comfortably afford. It’s been helpful — putting a twelfth of that into savings each month means most emergencies are covered, or at least a lot less budget-breaking, and we should have plenty to replace the roof when needed. Maybe something like that would help whenever you next buy.

  3. c!tizen says:


    what do they consider a “typical home” and would the buyer/renter fit into that typical home category? Sure, it’s cheaper to rent a 700 sqft apartment, but if you’ve got a wife and 2 kids the murder charges you face after killing them from driving each other crazy will afford you a free 6 x 6 apartment for life… huh, I guess that is cheaper than buying.

    • yasth says:

      It is based on the idea of renting a home vs. buying a similar home. If you expand it to look at apartments as well then you will have to recalculate it yourself (it isn’t hard) but in general if an apartment (of similiar size) is acceptable that amounts to a 20% (or so) discount vs. a free standing dwelling on then rental market (either through utility bill coverage or otherwise) so just multiply by 1.2 and you should have a rough sq foot per sq foot calculation. Though in general if you plan on using this for real it behooves you to calculate by hand your specific situation.

  4. jesdynf says:

    The cost of buying a home versus renting it *for a year*.

  5. hmburgers says:

    I think those numbers are basically bogus.

    It’s difficult to compare your average rental to your average home. Most rentals are higher density dwelling units.

    Around here you’ll be paying $1900-3000/mo to rent a house in the suburbs that is in decent shape. Your mortgage would be about the same. But my area’s number is over 15.

    Now, if you’re talking a $350K 1500sq-ft 3BR/1BA single family home on a 1/4-acre vs. a 1200sq-ft 3BR/1BA apartment in a multi-family, or an apartment building, I just don’t think that is a fair comparison.

    And if you do attempt to compare say condo’s to rentals you also run into issues because condo fees around here have become nuts.

  6. Scurvythepirate says:

    These numbers don’t mean crap. I used to rent but I have since bought a house a few years ago.

    I am paying (including taxes) about $300 more for my house than if I rented.

    But once you factor in all the extras that home ownership entails (paying for your own repairs, yard work, larger heat and electric bills) and my house has an inground pool (extra $100 or so a month in the summer), I am probably paying close to $500-600 more than renting.

    But for that extra money, I have a house that is 2-3 times the size of a typical apartment in my area.

    So I think the choice of whether you buy or rent is more of a personal choice. Sure I could save money in an apartment, but there is no way I could give up over 1,000 square feet of living area.

    • Megalomania says:

      you also – unlike with renting – will be able to recoup a good amount of that when you sell the house (if not more, depending on how soon you sell it after your mortgage). It’s usually more cost effective to own than rent unless you can’t anchor yourself to an area for a while, although relying on being able to sell is begging for trouble (as the last few years have shown)

      • yasth says:

        Owner’s equity is included in the calculation (Also included, property taxes, mortgage deduction (roughly), maintenance & repair, appreciation, and Realtor fees). It is actually a very good tool (if broad and something that needs to be recalculated to individual situations)A big presumption is that it assumes you move ever 7 years (roughly) Which is probably high for a starter home, and low for a twilight years dwelling.

      • Awesome McAwesomeness says:

        Except that most people forget to factor in all of that interest they pay.My grandmother has a house in a desirable area. She bought it for $80,000 32 years ago. It is paid for. She paid about $80,000 in interest. Plus, she has spend thousands in just keeping it from falling apart. She has done no updates or remodeling other than new floors and a little paint. She had it appraised by a Realtor. Because it is out of date, she can sell it for about $150,000. But, she has spent at least $75,000 in upkeep (a little more than $2000 a year) and repairs (national average is $3000). So, the house has cost her $225,000 not counting her taxes and homeowners insurance. If she can sell it for $150, minus the real estate fees, which would leave her about $142,500. That looks like she is coming out $82,500 short of what she has put into it. If she remodeled it at a cost of about $50,000 she could sell it for around $200,000, which would still leave her in the hole by about the same amount.

        Now, if you break down that $82,500, IF SHE WERE TO SELL HER HOUSE, and count it as rent money, she comes out ahead because it equals out to about $250 a month rent. But, it seems like a ton of trouble to go to. But, since she isn’t selling her house as long as she is alive, her actual cost per month so far has been around $700. That sounds super cheap, but she purchased the house in the late 1970’s. In 1978 the average monthly rent was $260. We live is a far cheaper than average area too. So, $700 a month rent averages out from the 1970’s isn’t a great deal, especially with all of the hassles she has had just trying to keep it up and pay for it. She only uses 3 of the 7 rooms, so lots of wasted space.

        When you really calculate the costs of a house, you need to think about all costs involved which include:

        Total interest paid
        Loan fees
        Possible refinance fees
        Possible HOA dues

        It isn’t as cut and dry as people make it out to be–hence why so many people are losing homes and can’t afford to stay in them.

        • Awesome McAwesomeness says:

          Pardon my proofreading errors.

        • AnthonyC says:

          Historically, inflation averages about 3.5% a year (obviously much less right now). With today’s interest rates, that means that, in real inflation-adjusted, on a 30 year mortgage, you end up paying ~10% more than it costs to buy the house with cash upfront.

          In the late 1970’s, interest rates were 10-15%. Today, they are

    • Clyde Barrow says:

      Yeah you’re right and your numbers are about the same for me. I have thought of selling my home but it’s so damn cozy and right for me. It’s warm, insulated, brick, new doors and windows and the best thing is that my heat and gas are low in this house. Rent? About $800 a month in my area while my mortgage is a little over $1,100. So why rent when I can do anything I want with a large corner lot, two driveways, huge back, side, and front yard and no one to bother me all the while playing Halo Reach on “10” with my surround sound. Life is good.

  7. thompson says:

    And my metro area is #1 on the list ;)

    Beside the outrageous rent/own comparison living here in the East Bay, I also think I’m probably better off not owning real property when the “big one” hits. Much easier to write off personal belongings than a $700k house.

  8. framitz says:

    At a score of 27 I can use this as justification for not purchasing, my wife wants to buy, but I think it’s a bad idea and the number supports me.

    Of course if the number was below 15 I would just keep quiet about that.

  9. Michaela says:

    My ratio changed from 19.8 to 14.9 in one year. If it hops around like this, how can I trust this table when making such an important decision?

  10. GoPadge says:

    Yeah. Good luck finding a rental when you have a wife, 5 kids, four cars, two cats and a dog.

    • Pryce says:

      I am currently renting a 5 bedroom 3000 squ ft + SFH in the burbs. Finding someone who can’t sell and convincing them to rent to you is not hard at all. After the market falls another 20% in the next year and a half I will offer to buy this place, when the ratio is in the 12 – 13 range. If the owner wont sell, I’ll just move across the street to someone who will.

      This is a great time to be a growing family that likes a McMansion in the Exurbs.

  11. asok says:

    How about these numbers?
    Disclaimer: These are horrifically skewed statistics. Like virtually all statistics they are completely worthless.
    The biggest effect I can see with a renter rather than a homeowner is what they spend their money on. Sure you might be better off if you saved 500 dollars a month and rented instead of buying. But how many people do that?

  12. travel_nut says:

    Maybe I’m doing something wrong. I calculated for my personal situation–$100,000 house (which I already own) vs $700/month for a decent apartment in a good area. 100,000/8400=1.19

    Of course, that’s just looking at my own house rather than median houses in my area.

  13. krom says:

    Many cities average is skewed by the number of high-cost condominiums in the central core. I live in the Seattle suburbs (where most people buy houses, mind you) and the rent ratio is closer to 10 than 20. But there are pockets of wealthy communities and hot-new-thing developments where the rent ratio is ridiculous (and there may not even be any rental properties anyway) are through the roof.

  14. awesome anna says:

    It may be cheaper to own your home than to rent in some places, but how the heck is a renter supposed to save up the 10% or more that you need to put down to even get the house?

    • mac-phisto says:

      there are FTHB programs that allow you to put down as little as 3.5% (usually thru the FHA, but many states have their own HAs that offer similar programs).

      but seriously? if you can’t afford a down payment, you can’t afford to buy. there are so many extra costs with owning beyond the monthly mortgage payment & you have to have the financial discipline to be able to save for repairs & renovations. not to mention tax & insurance increases.

  15. Nigerian prince looking for business partner says:

    One thing these types of calculators never seem to take into account is the type of neighborhoods where the perponderance of rental units are located in older cities. In older cities in the northeast and midwest, one of the quickest ways to judge the desirability of a nieghborhood is the percentage of owner occupied homes.

    In many cities, you really don’t get the modern townhouses and condos as an option like you do in newer suburbs. It’s typically a choice between a block that’s mostly owner occupied or one that is almost entirely rental units. In many instances, the rental units are big, old houses that were (poorly) converted over into apartments or houses where out-of-state landlords put $0 into maintenance and have no interest in who they rent to.

    There’s a definite premium to be paid for a nice rental unit in a nice neighborhood and they’re typically mixed in predominately owner occupied blocks.

  16. AustinTXProgrammer says:

    I just ran the ratio on my suburban house (using recent rental comps in my immediate neighborhood, there are no available rentals right now) and came up with 10.4.

    I ran the ratio on the house we used to rent with the price the landlord offered us (discounted as there would be no time on the market, no real estate agent fees, etc) and came up with 14.7. We were also paying below market rent.

    What did they base these numbers on?

  17. Rose says:

    We purchased a home because it would have been twice as much to rent as to buy, even factoring in a monthly amount to deposit to a ‘Home Repair’ account for when things break.

  18. kityglitr says:

    Ugh. I live in a pretty rural area that has a large university. Any guidelines on how to calculate my area’s rent ratio? A basic 3 bedroom home would rent for around $1250 to $1500 a month and to own a home like that, you’d be paying anywhere from $150,000 to $200,000. Help!

  19. Thyme for an edit button says:

    It doesn’t change my decision because I don’t have the $$ for a down payment, but even if I did, I like the freedom of renting. I don’t want to have to pass up good opportunities because I am tied to a house. If I had kids, I am sure I would feel differently about flitting about from place to place.

  20. sonneillon says:

    It’s about trade offs. Sometimes rent is a better deal long term (not often but sometimes it is) or you need flexibility. Generally across a lifetime a house is a better choice, but a house makes it hard to move, and much of your wealth is tied into that house, something to remember in case you don’t pay the fire department.

  21. whitecat says:

    Baloney. In Denver, we have relatively low energy prices, property taxes, and homeowner’s insurance rates, and high rents. There is absolutely no way I could rent my house for what it costs me to own it.

  22. neilb says:

    This does not factor in a lot of things.
    -Is the market going down a lot in your town?
    -Do you want to be able to move? Remember, it costs thousands to transfer property, IF you can.
    -How high are those taxes (you pay those as a part of your rent, after all)?
    -How high are the maintenance costs on that property?

    We can rent or buy the house we are in and I am happy to rent while we watch the prices fall and while the owner hopes that the market will rebound. I hate that it is happening, but is a game that works in favor of the renters right now.

    Meanwhile, we pay a reasonable cost for the convenience of not worrying about anything. It is a winner to keep renting.