The document analyzes data from Trulia to determine whether it is more affordable to rent or buy homes in major U.S. metropolitan areas. It calculates a price-to-rent ratio for each area and finds that buying is generally cheaper than renting when the ratio is 15 or less. Among the top 10 metros where buying is most affordable are Detroit, Oklahoma City, and Dayton. The top 10 metros where renting is most affordable include Honolulu, San Francisco, and New York. It also provides price-to-rent ratios for specific areas within major cities like Los Angeles, San Francisco, New York, and Chicago.

1. Cheaper to Rent or Buy a Home?
Winter 2012

2. What Does The Rent vs. Buy Index Tell Us?
Trulia’s Rent vs. Buy Index tracks whether it is more
affordable to rent or to buy a home in America’s 100
largest metropolitan areas.
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3. Calculating a Metro’s Price-to-Rent Ratio
The Winter 2012 report is based on asking prices for rental and for-sale
homes on Trulia.com between Dec 1, 2011 and Feb 29, 2012.Trulia
calculates the price-to-rent ratios for 100 major U.S. metros, after
adjusting for attributes of the properties and their locations, to reflect the
relationship between sales and rental prices for units with similar
attributes in similar neighborhoods.
Sample Price-to-Rent Ratio Calculation (after adjusting for property
attributes and neighborhood attributes):
• Asking Sales Price: $200,000
• Asking Monthly Rent: $1500
• Price-to-rent ratio: $200,000 ÷ ($1,500 x 12) = 11.1
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4. Interpreting a Metro’s Price-to-Rent Ratio
• Price-to-Rent Ratio of 15 or less: Buying a home is a better deal than
renting for people planning to live in a home for at least five years.
However, if the buyer is planning to live the home for less than five
years, buying could be a better deal if the index is 10 or less, depending
on moving and closing costs.
• Price-to-Rent Ratio of 15 to 20: Renting or buying a home could be a
better deal, depending on a prospective homebuyer’s tax bracket and if
they plan to itemize their tax deductions.
• Price-to-Rent Ratio of 20 or more: Renting is a better deal than buying
a home, except for people planning to live in a home a very long time
(fifteen years or more).
Note: These interpretations take into account estimates of the additional costs of
homeownership or renting, such as insurance, maintenance and so on.
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5. National Rent vs. Buy Trends
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6. Buying Trumps Renting in 98 Out of the 100 Largest Metros
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7. Top 10 Metros Where Buying Is Most Affordable Relative To Renting
Buying a home is much cheaper than renting in slow-growing places with high
vacancy rates and land to spare, like Detroit and Cleveland, where prices are
unlikely to improve much in the future
# U.S. Metropolitan Area Price:Rent Ratio
1 Detroit, MI 3.7
2 Oklahoma City, OK 4.3
3 Dayton, OH 4.8
4 Warren-Troy-Farmington Hills, MI 5.4
5 Toledo, OH 6.0
6 Grand Rapids, MI 6.1
7 Cleveland, OH 6.2
8 Atlanta, GA 6.5
9 Gary, IN 6.7
10 Memphis, TN-MS-AR 6.8
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8. Top 10 Metros Where Renting is Most Affordable Relative to Buying
Metros where homeownership is expensive tend to have stronger long-term
economic growth and little room to build new homes, like Boston and the SF
Bay Area, where people expect home prices to increase over time.
# U.S. Metropolitan Area Price:Rent Ratio
1 Honolulu, HI 17.0
2 San Francisco, CA 15.5
3 New York, NY-NJ 14.5
4 San Jose, CA 14.3
5 Orange County, CA 13.5
6 Los Angeles, CA 13.0
7 San Diego, CA 12.7
8 Colorado Springs, CO 12.0
9 Boston, MA 12.0
10 Albuquerque, NM 11.9
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9. Local Rent vs. Buy Trends
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10. Where Buying Beats Renting in the New York area
While priced-out Manhattanites have bid up home values in Staten Island and
Brooklyn, owning a home is still cheaper than renting in Queens, the Bronx and
nearby suburban counties.
Borough or County Price:Rent Ratio
Manhattan 20.0
Brooklyn 15.7
Staten Island 15.3
Queens 13.6
Bergen, NJ (Hackensack) 12.5
Hudson, NJ (Jersey City) 12.1
Nassau, NY (Long Island) 11.8
Bronx 10.9
Westchester, NY 9.3
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11. Where Buying Beats Renting in the San Francisco Bay Area
Homeownership is most expensive relative to renting in San Francisco, the
Peninsula (San Mateo County) and in the South Bay (Santa Clara County).
In the East Bay (Alameda County and Contra Costa County), where vacancies
are higher and foreclosures more common, buying looks even better relative to
renting than in the rest of the Bay Area.
County Price:Rent Ratio
San Francisco 17.2
Santa Clara (San Jose) 14.5
San Mateo 14.0
Alameda (Oakland) 12.1
Contra Costa 10.8
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12. Where Buying Beats Renting in the Los Angeles area
Buying a home generally becomes cheaper relative to renting in Southern
California as you move away from the coast. The big exception: Pasadena and
the San Gabriel Valley, where buying is expensive despite the long drive to the
beach.
Area Code Price:Rent Ratio
Westside LA / Beaches / Coast (310 / 424) 15.8
Pasadena / San Gabriel Valley (626) 15.8
Orange County South (949) 14.4
Central LA (213 / 323) 13.4
Orange County North (714 / 657) 12.8
Long Beach (562) 11.9
San Fernando Valley (818 / 747) 11.7
San Bernardino (909) 10.2
Riverside (951) 9.8
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13. Where Buying Beats Renting in the Chicago area
In Chicago, homeownership is much more affordable relative to renting when
compared to other major metros like New York and San Francisco. Even
downtown, in the Loop and Near North Side, buying is more affordable relative
to renting than in many suburbs of New York, San Francisco, and Los Angeles.
Area Code Price:Rent Ratio
Loop and Near North Side (312) 11.4
Chicago except downtown (773) 8.0
North/Northwest Suburbs (847 / 224) 7.7
Western Suburbs (630 / 331) 7.5
South Suburbs (708) 5.0
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14. Why Bedroom Size Matters in Rent vs. Buy Debate
In most major metros, the price-to-rent ratio is lower for smaller homes, so
buying seems even more affordable relative to renting for a one-bedroom or
studio home than for a home with three or more bedrooms.
U.S. Metropolitan Area Price:Rent Ratio
1 Bedroom
2 Bedrooms 3+ Bedrooms
(includes studio)
New York, NY-NJ 13.7 14.7 15.9
Los Angeles, CA 11.6 12.5 14.1
Chicago, IL 7.1 8.0 8.5
San Francisco, CA 13.1 14.8 18.2
Washington DC-VA-MD-WV 9.9 9.9 12.6
Miami 9.5 10.1 10.4
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15. About Trulia
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scoop on properties, places and real estate professionals. Trulia has
unique info on the areas people want to live that can’t be found
anywhere else: users can learn about agents, neighborhoods,
schools, crime and even ask the local community questions. Real
estate professionals use Trulia to connect with millions of
transaction-ready buyers and sellers each month via our hyper local
advertising services, social recommendations and top-rated mobile
apps. Trulia is headquartered in downtown San Francisco and is
backed by Accel Partners and Sequoia Capital. Trulia and the Trulia
logo are registered trademarks of Trulia, Inc.
To learn more, email us at pr@trulia.com
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