NAR president: Here’s what’s changing with home sales
The National Association of Realtors (NAR) massive real estate settlement changes the way homes are bought and sold. FOX Business’ Katrina Campins joined LiveNOW from FOX to break down how the new rules could impact the housing market.
The study, conducted by Clever, retrieved data from the U.S. Census Bureau, the Federal Reserve, Zillow, Bankrate, Rocket Mortgage, the Tax Foundation, Business Insider, Freddie Mac, and the Federal Reserve. This story was reported from Los Angeles.
Top cities for buying a home
Among the 50 most populous metros, San Jose, California, has the highest price-to-rent ratio, while Cleveland has the lowest, according to a new study.
Based on the price-to-rent ratio, the data found that it is cheaper to buy a home in only 18 of the 50 most populous metros.
Nationally, renters save $289 more than homeowners each month, according to the findings.
When it comes to buying versus renting a home, buying has long been considered the American dream and the superior option.
But a new study aims to identify whether it’s actually cheaper to rent or buy in the most populous U.S. metros.
The study, conducted by Clever, retrieved data from the U.S. Census Bureau, the Federal Reserve, along with housing and business companies, to identify the best option based on a price-to-rent ratio.
The price-to-rent ratio was calculated by dividing the median home price by the median annual rent.
- Cleveland, Ohio
- Pittsburgh, Pennsylvania
- Chicago, Illinois
- New Orleans, Louisiana
- Memphis, Tennessee
- Birmingham, Alabama
- Detroit, Michigan
- St. Louis, Missouri
- Cincinnati, Ohio
- Indianapolis, Indiana
Best cities for renting
Renting is typically cheaper than buying across most of the U.S., but it is much better to rent in nine of the 50 largest U.S. metros, according to the price-to-rent ratio.
According to the study, Americans are much better off renting in major cities in the West, where high construction costs, confined building space, and the emergence of high-paying industries has led to a significant increase in home values.
- San Jose, California
- San Francisco, California
- Los Angeles, California
- Seattle, Washington
- Salt Lake City, Utah
- San Diego, California
- Portland, Oregon
- Denver, Colorado
- Austin, Texas
- Sacramento, California
Housing prices continue to increase over time
Across the country, the average home price has increased 39% more than the average rent price over the past five years and 72% faster in the past year, according to the study.
Nationally, renters save $289 more than homeowners each month, Clever found.
The price-to-rent ratio peaked in 2021, when rent prices continued to rise while home values ground to a halt as mortgage rates went up. The current ratio has dipped, but that’s still up from 2019.
According to new research, younger adults between the age of 22 and 35 spend an average of $25,620 per year as a renter.
But, in more than 200 U.S. cities, the typical starter home comes with a price tag of $1 million or more, according to a new analysis by Zillow.
And while buyers and sellers are both waiting for interest rates to fall, Realtor.com senior economist Ralph McLaughlin said affordability will still be an issue in the long run.
In the near term, lower borrowing rates will make housing more affordable over a three- to six-month period, McLaughlin said. But eventually, they will “manifest themselves into price growth and offset the decrease in mortgage payments.”
This means When borrowing rates come down, buyers have more money that they can borrow. In other words, they have more purchasing power.
“They can actually pay more for a home than they otherwise would,” McLaughlin said, adding that “when they go to bid on a house… they can bid up to price more than when mortgage rates were higher.”
Bottom line: As the price-to-rent ratio increases, Americans are still, overall, better off renting instead of buying a home — putting the American dream of homeownership further out of reach.
FAQs
Q: What is the price-to-rent ratio?
A: The price-to-rent ratio is a measure of the affordability of buying versus renting a home. It is calculated by dividing the median home price by the median annual rent.
Q: Which cities are the best for buying a home?
A: According to the study, the top cities for buying a home are Cleveland, Ohio; Pittsburgh, Pennsylvania; Chicago, Illinois; New Orleans, Louisiana; Memphis, Tennessee; Birmingham, Alabama; Detroit, Michigan; St. Louis, Missouri; Cincinnati, Ohio; and Indianapolis, Indiana.
Q: Which cities are the best for renting?
A: According to the study, the top cities for renting are San Jose, California; San Francisco, California; Los Angeles, California; Seattle, Washington; Salt Lake City, Utah; San Diego, California; Portland, Oregon; Denver, Colorado; Austin, Texas; and Sacramento, California.
Conclusion:
The study found that renting is typically cheaper than buying across most of the U.S., but it is much better to rent in nine of the 50 largest U.S. metros. The top cities for buying a home are located in the Midwest and the South, while the top cities for renting are located in the West. As the price-to-rent ratio increases, Americans are still, overall, better off renting instead of buying a home — putting the American dream of homeownership further out of reach.
FAQs:
Q: What is the price-to-rent ratio?
A: The price-to-rent ratio is a measure of the affordability of buying versus renting a home. It is calculated by dividing the median home price by the median annual rent.
Q: Which cities are the best for buying a home?
A: According to the study, the top cities for buying a home are Cleveland, Ohio; Pittsburgh, Pennsylvania; Chicago, Illinois; New Orleans, Louisiana; Memphis, Tennessee; Birmingham, Alabama; Detroit, Michigan; St. Louis, Missouri; Cincinnati, Ohio; and Indianapolis, Indiana.
Q: Which cities are the best for renting?
A: According to the study, the top cities for renting are San Jose, California; San Francisco, California; Los Angeles, California; Seattle, Washington; Salt Lake City, Utah; San Diego, California; Portland, Oregon; Denver, Colorado; Austin, Texas; and Sacramento, California.
