Housing

Should You Rent Or Buy?

For sale
Scott Olson/Getty Images

I'd like to dedicate this post to all the renters out there trying to decide whether to buy a house.

Yes, houses are a lot cheaper than they were a few years ago. But prices were crazy a few years ago. So are prices still a little crazy now? About right? A bargain?

There are a couple of helpful ways to ask this question. And the answers depend partly on where you live. (Scroll down to the bottom of the post to see data for dozens of cities around the country.)

1. What's the cost of buying versus renting?

This is called the price-to-rent ratio. It's the the cost of the median home divided by a year's median rent.

The classic rule of thumb is that when the ratio is under 20, buying may make more sense than renting. But over the long-term, the ratio has consistently been higher in some places and lower in others. So it's worth comparing where your city is now to where it was before the bubble. A ratio that's higher than historic norms suggests prices may have further to fall.

2. How much do houses cost relative to income?

This is called the price-to-income ratio. It's the median home price divided by median household income.

During the boom, this ratio shot way up, as home prices rose faster than incomes. Now, it varies from place to place: In some cities it's higher than historical norms, suggesting home prices have further to fall. In others, it's lower, suggesting houses are a good buy.

A few final notes: The longer you're planning to live in a house, the more sense it makes to buy. And, of course, there are plenty of non-quantitative things about buying a house that are hugely important (sense of ownership, phases of life, etc.). But for those issues, you're on your own.

  • Price-to-Rent Ratios
  • Price-to-Income Ratios
Price-to-Rent Ratios
Metropolitan area Peak of
the bubble
(Q1 2006)
Current
(Q4 2010)
Long-term
average
(1989-2003)
U.S.18.4611.349.56
Atlanta, GA19.0414.6913.42
Austin, TX20.0022.4415.79
Boston, MA22.9818.7215.37
Baltimore, MD21.0515.5511.30
Charlotte, NC22.6721.7516.17
Chicago, IL23.3915.2316.19
Cincinnati, OH18.0015.3014.58
Cleveland, OH16.1913.1313.24
Columbus, OH20.8817.1715.68
Dallas - Fort Worth, TX16.8916.4615.58
Denver, CO25.3420.9316.30
Detroit, MI18.379.9413.42
East Bay, CA53.4930.3629.08
Fort Lauderdale, FL28.7015.4313.36
Hartford, CT20.4818.5913.51
Honolulu, HI36.6933.1623.02
Houston, TX15.9416.8313.34
Indianapolis, IN16.7316.2413.78
Inland Empire, CA29.0713.6616.60
Jacksonville, CA21.4313.8812.12
Kansas City, MO17.8816.4813.62
Las Vegas, NV30.6213.3014.96
Long Island, NY24.9119.7512.08
Los Angeles, CA26.4115.9612.57
Memphis, TN19.3815.6415.75
Miami, FL30.1115.2812.19
Milwaukee, WI23.7820.8215.03
Minneapolis, MN21.6914.0513.48
Nashville, TN23.7122.1916.99
New Orleans, LA22.1416.4913.16
New York, NY18.6414.079.42
Norfolk, VA24.6521.7116.52
North - Central New Jersey30.6323.1117.46
Oklahoma City, OK13.5314.2611.33
Orange County, CA44.0028.6920.54
Orlando, FL24.5212.0212.49
Palm Beach County, FL27.8013.3813.06
Philadelphia, PA17.0013.389.94
Phoenix, AZ26.3612.0612.07
Pittsburgh, PA11.9411.649.85
Portland, OR32.0724.1717.36
Raleigh, NC22.1722.8516.79
Richmond, VA22.7721.2914.93
Sacramento, CA30.2814.9915.59
Salt Lake City, UT20.3019.2414.53
San Antonio, TX15.1416.4712.63
San Diego, CA36.6622.5518.18
San Francisco, CA43.1529.3224.41
San Jose, CA46.4329.9523.33
Seattle, WA30.1622.6916.84
Bridgeport, CT24.8520.5714.92
St. Louis, MO17.7815.9213.02
Tampa, FL25.2113.3713.31
Washington - Northern Virginia - Maryland27.4117.3513.00

Source: Fiserv, Federal Housing Finance Agency, Property Portfolio Research, Moody's Analytics

Price-to-Income Ratios
Metropolitan area Peak of
the bubble
(Q1 2006)
Current
(Q4 2010)
Long-term
average
(1989-2003)
U.S.2.751.711.92
Abilene, TX1.651.501.69
Akron, OH1.441.121.45
Albany, GA1.461.311.40
Albany-Schenectady-Troy, NY2.021.751.64
Albuquerque, NM2.071.862.08
Alexandria, LA1.241.131.24
Allentown-Bethlehem-Easton, PA-NJ2.121.761.71
Altoona, PA1.351.281.28
Amarillo, TX1.241.111.22
Ames, IA1.681.521.67
Anchorage, AK2.171.961.72
Anderson, IN1.331.041.30
Anderson, SC1.681.621.59
Ann Arbor, MI2.391.741.93
Anniston-Oxford, AL1.501.341.46
Appleton, WI1.321.181.29
Asheville, NC2.552.481.97
Athens-Clarke County, GA2.242.131.98
Atlanta-Sandy Springs-Marietta, GA1.631.231.49
Atlantic City-Hammonton, NJ2.831.971.51
Auburn-Opelika, AL2.522.472.19
Augusta-Richmond County, GA-SC1.581.481.55
Austin-Round Rock-San Marcos, TX1.892.071.79
Bakersfield-Delano, CA3.781.441.96
Baltimore-Towson, MD2.411.721.64
Bangor, ME1.851.601.60
Barnstable Town, MA4.593.372.77
Baton Rouge, LA1.651.501.55
Battle Creek, MI1.351.021.22
Bay City, MI1.551.151.25
Beaumont-Port Arthur, TX1.191.091.27
Bellingham, WA3.993.092.59
Bend, OR3.492.412.11
Bethesda-Rockville-Frederick, MD3.342.292.13
Billings, MT1.751.761.60
Binghamton, NY1.561.441.38
Birmingham-Hoover, AL1.771.711.77
Bismarck, ND1.561.531.52
Blacksburg-Christiansburg-Radford, VA2.272.151.99
Bloomington, IN1.891.821.82
Bloomington-Normal, IL1.671.481.71
Boise City-Nampa, ID2.151.761.72
Boston-Quincy, MA3.402.692.48
Boulder, CO3.283.372.89
Bowling Green, KY1.731.601.73
Bremerton-Silverdale, WA2.862.022.11
Bridgeport-Stamford-Norwalk, CT3.012.422.37
Brownsville-Harlingen, TX1.130.961.19
Brunswick, GA2.091.871.69
Buffalo-Niagara Falls, NY1.271.141.40
Burlington, NC1.781.541.82
Burlington-South Burlington, VT2.962.592.29
Cambridge-Newton-Framingham, MA3.252.702.54
Camden, NJ2.271.641.65
Canton-Massillon, OH1.631.211.54
Cape Coral-Fort Myers, FL3.011.161.74
Cape Girardeau-Jackson, MO-IL1.511.321.50
Carson City, NV3.111.832.03
Casper, WY1.271.321.07
Cedar Rapids, IA1.581.441.58
Champaign-Urbana, IL1.711.471.50
Charleston, WV1.571.501.64
Charleston-North Charleston-Summerville, SC2.471.951.83
Charlotte-Gastonia-Rock Hill, NC-SC1.671.561.77
Charlottesville, VA2.712.282.02
Chattanooga, TN-GA1.651.571.49
Cheyenne, WY1.591.431.51
Chicago-Joliet-Naperville, IL-IN-WI2.341.501.81
Chico, CA5.863.203.53
Cincinnati-Middletown, OH-KY-IN1.661.361.64
Clarksville, TN-KY1.271.201.45
Cleveland, TN1.791.661.61
Cleveland-Elyria-Mentor, OH1.591.161.55
Coeur d'Alene, ID2.902.332.04
College Station-Bryan, TX1.791.721.92
Colorado Springs, CO2.301.841.97
Columbia, MO1.801.661.74
Columbia, SC1.661.601.62
Columbus, GA-AL1.451.251.46
Columbus, IN1.421.401.47
Columbus, OH1.741.401.70
Corpus Christi, TX1.341.151.37
Corvallis, OR2.712.652.25
Crestview-Fort Walton Beach-Destin, FL2.891.611.84
Cumberland, MD-WV1.591.411.48
Dallas-Plano-Irving, TX1.431.391.49
Dalton, GA1.721.531.51
Danville, IL1.030.830.97
Danville, VA1.591.401.61
Davenport-Moline-Rock Island, IA-IL1.221.101.17
Dayton, OH1.501.201.48
Decatur, AL1.471.501.54
Decatur, IL1.060.951.14
Deltona-Daytona Beach-Ormond Beach, FL2.791.261.65
Denver-Aurora-Broomfield, CO2.141.861.86
Des Moines-West Des Moines, IA1.481.351.46
Detroit-Livonia-Dearborn, MI1.700.641.36
Dothan, AL1.491.371.48
Dover, DE2.141.851.69
Dubuque, IA1.481.331.40
Duluth, MN-WI1.651.421.21
Durham-Chapel Hill, NC1.791.721.77
Eau Claire, WI1.611.441.37
Edison-New Brunswick, NJ3.242.342.02
El Centro, CA2.661.041.50
El Paso, TX1.401.291.50
Elizabethtown, KY1.521.361.46
Elkhart-Goshen, IN1.321.401.39
Elmira, NY1.171.061.16
Erie, PA1.591.491.53
Eugene-Springfield, OR2.742.422.03
Evansville, IN-KY1.211.101.24
Fairbanks, AK2.001.891.74
Fargo, ND-MN1.581.451.52
Farmington, NM2.081.811.72
Fayetteville, NC1.241.131.52
Fayetteville-Springdale-Rogers, AR-MO1.831.411.65
Flagstaff, AZ3.522.052.11
Flint, MI1.661.021.32
Florence, SC1.691.591.75
Florence-Muscle Shoals, AL1.651.611.71
Fond du Lac, WI1.521.351.34
Fort Collins-Loveland, CO2.432.212.20
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL3.911.932.10
Fort Smith, AR-OK1.241.231.34
Fort Wayne, IN1.241.141.26
Fort Worth-Arlington, TX1.361.301.48
Fresno, CA3.801.722.00
Gadsden, AL1.521.321.40
Gainesville, FL2.521.671.88
Gainesville, GA1.981.511.79
Gary, IN1.491.361.46
Glens Falls, NY2.302.071.82
Goldsboro, NC1.631.431.68
Grand Forks, ND-MN1.611.371.48
Grand Junction, CO2.402.021.80
Grand Rapids-Wyoming, MI1.601.291.48
Great Falls, MT1.611.541.52
Greeley, CO2.401.932.02
Green Bay, WI1.671.461.55
Greensboro-High Point, NC1.811.711.84
Greenville, NC1.661.501.71
Greenville-Mauldin-Easley, SC1.801.801.79
Gulfport-Biloxi, MS1.641.451.48
Hagerstown-Martinsburg, MD-WV2.751.861.89
Hanford-Corcoran, CA2.801.411.74
Harrisburg-Carlisle, PA1.681.591.53
Harrisonburg, VA2.512.152.03
Hartford-West Hartford-East Hartford, CT2.241.741.95
Hattiesburg, MS1.491.431.47
Hickory-Lenoir-Morganton, NC1.691.721.59
Hinesville-Fort Stewart, GA1.741.471.60
Holland-Grand Haven, MI1.811.531.60
Honolulu, HI5.134.333.80
Hot Springs, AR1.891.741.69
Houma-Bayou Cane-Thibodaux, LA1.361.271.37
Houston-Sugar Land-Baytown, TX1.211.211.26
Huntington-Ashland, WV-KY-OH1.561.411.48
Huntsville, AL1.591.641.66
Idaho Falls, ID1.411.351.43
Indianapolis-Carmel, IN1.351.321.43
Iowa City, IA1.901.681.81
Ithaca, NY2.292.101.76
Jackson, MI1.681.191.35
Jackson, MS1.391.311.49
Jackson, TN1.411.241.52
Jacksonville, FL1.961.201.38
Jacksonville, NC1.361.101.30
Janesville, WI1.641.481.37
Jefferson City, MO1.361.281.35
Johnson City, TN1.871.791.79
Johnstown, PA1.221.111.21
Jonesboro, AR1.371.161.48
Joplin, MO1.321.201.30
Kalamazoo-Portage, MI1.801.481.58
Kankakee-Bradley, IL1.401.161.24
Kansas City, MO-KS1.661.481.54
Kennewick-Pasco-Richland, WA1.741.551.69
Killeen-Temple-Fort Hood, TX1.130.951.35
Kingsport-Bristol-Bristol, TN-VA1.831.771.67
Kingston, NY3.092.111.83
Knoxville, TN1.951.811.71
Kokomo, IN1.351.151.29
La Crosse, WI-MN1.611.451.39
Lafayette, IN1.581.491.71
Lafayette, LA1.531.371.52
Lake Charles, LA1.241.251.40
Lake County-Kenosha County, IL-WI2.031.791.73
Lake Havasu City-Kingman, AZ3.702.142.34
Lakeland-Winter Haven, FL2.120.881.46
Lancaster, PA1.971.871.69
Lansing-East Lansing, MI1.771.051.51
Laredo, TX1.341.171.57
Las Cruces, NM1.931.551.82
Las Vegas-Paradise, NV3.011.331.87
Lawrence, KS2.151.801.89
Lawton, OK1.211.051.34
Lebanon, PA1.701.621.60
Lewiston, ID-WA2.082.051.76
Lewiston-Auburn, ME2.121.691.75
Lexington-Fayette, KY1.771.721.60
Lima, OH1.381.241.29
Lincoln, NE1.511.351.47
Little Rock-North Little Rock-Conway, AR1.311.231.35
Logan, UT-ID2.102.131.95
Longview, TX1.241.181.27
Longview, WA2.652.192.06
Los Angeles-Long Beach-Glendale, CA4.212.302.29
Louisville-Jefferson County, KY-IN1.651.541.57
Lubbock, TX1.231.081.24
Lynchburg, VA1.971.921.80
Macon, GA1.421.221.46
Madera-Chowchilla, CA3.691.792.08
Madison, WI2.021.831.73
Manchester-Nashua, NH2.942.132.05
Manhattan, KS1.501.141.30
Mankato-North Mankato, MN1.791.591.51
Mansfield, OH1.491.191.40
McAllen-Edinburg-Mission, TX1.200.981.29
Medford, OR3.582.392.17
Memphis, TN-MS-AR1.290.931.45
Merced, CA4.611.232.13
Miami-Miami Beach-Kendall, FL3.751.701.94
Michigan City-La Porte, IN1.621.471.45
Midland, TX0.891.041.03
Milwaukee-Waukesha-West Allis, WI2.131.661.67
Minneapolis-St. Paul-Bloomington, MN-WI2.101.331.57
Missoula, MT2.822.702.16
Mobile, AL1.681.371.61
Modesto, CA4.191.392.17
Monroe, LA1.401.281.38
Monroe, MI1.971.481.70
Montgomery, AL1.441.371.55
Morgantown, WV1.951.831.82
Morristown, TN1.901.751.66
Mount Vernon-Anacortes, WA2.982.582.30
Muncie, IN1.321.061.27
Muskegon-Norton Shores, MI1.521.171.35
Myrtle Beach-North Myrtle Beach-Conway, SC3.082.192.21
Napa, CA4.642.302.64
Naples-Marco Island, FL4.892.122.69
Nashville-Davidson--Murfreesboro--Franklin, TN1.641.551.51
Nassau-Suffolk, NY3.062.121.78
New Haven-Milford, CT2.481.721.87
New Orleans-Metairie-Kenner, LA1.381.431.50
New York-White Plains-Wayne, NY-NJ4.112.882.58
Newark-Union, NJ-PA3.412.352.29
Niles-Benton Harbor, MI1.731.461.45
North Port-Bradenton-Sarasota, FL3.631.682.05
Norwich-New London, CT2.641.902.00
Oakland-Fremont-Hayward, CA5.643.053.51
Ocala, FL2.101.051.45
Ocean City, NJ3.582.431.74
Odessa, TX0.941.000.97
Ogden-Clearfield, UT1.831.831.78
Oklahoma City, OK1.191.151.27
Olympia, WA2.832.072.11
Omaha-Council Bluffs, NE-IA1.411.301.45
Orlando-Kissimmee-Sanford, FL2.711.311.69
Oshkosh-Neenah, WI1.451.281.38
Owensboro, KY1.371.211.43
Oxnard-Thousand Oaks-Ventura, CA4.722.902.79
Palm Bay-Melbourne-Titusville, FL2.741.191.56
Palm Coast, FL4.381.932.64
Panama City-Lynn Haven-Panama City Beach, FL2.911.601.79
Parkersburg-Marietta-Vienna, WV-OH1.541.411.44
Pascagoula, MS1.531.331.40
Peabody, MA3.392.402.59
Pensacola-Ferry Pass-Brent, FL2.231.341.61
Peoria, IL1.231.161.25
Philadelphia, PA1.781.401.37
Phoenix-Mesa-Glendale, AZ3.041.411.74
Pine Bluff, AR1.140.981.16
Pittsburgh, PA1.321.141.33
Pittsfield, MA2.732.062.15
Pocatello, ID1.671.671.55
Port St. Lucie, FL2.821.181.57
Portland-South Portland-Biddeford, ME2.482.071.89
Portland-Vancouver-Hillsboro, OR-WA2.912.221.97
Poughkeepsie-Newburgh-Middletown, NY3.101.991.99
Prescott, AZ4.492.402.66
Providence-New Bedford-Fall River, RI-MA3.212.112.20
Provo-Orem, UT2.412.422.09
Pueblo, CO1.721.441.56
Punta Gorda, FL3.181.211.80
Racine, WI1.831.481.45
Raleigh-Cary, NC1.831.991.81
Rapid City, SD1.471.411.30
Reading, PA1.541.391.33
Redding, CA5.232.662.96
Reno-Sparks, NV3.021.651.90
Richmond, VA2.091.881.71
Riverside-San Bernardino-Ontario, CA4.291.932.21
Roanoke, VA1.911.791.72
Rochester, MN1.531.311.42
Rochester, NY1.211.081.30
Rockford, IL1.181.051.07
Rockingham County-Strafford County, NH2.732.001.94
Rocky Mount, NC1.451.291.55
Rome, GA1.571.271.43
Sacramento--Arden-Arcade--Roseville, CA3.381.592.03
Saginaw-Saginaw Township North, MI1.441.051.26
Salem, OR2.342.091.85
Salinas, CA7.062.443.56
Salisbury, MD2.381.671.75
Salt Lake City, UT1.761.751.61
San Angelo, TX1.201.141.20
San Antonio-New Braunfels, TX1.371.331.40
San Diego-Carlsbad-San Marcos, CA5.042.943.06
San Francisco-San Mateo-Redwood City, CA5.023.623.58
San Jose-Sunnyvale-Santa Clara, CA5.033.323.35
San Luis Obispo-Paso Robles, CA6.083.543.54
Sandusky, OH1.611.251.53
Santa Ana-Anaheim-Irvine, CA5.283.573.08
Santa Barbara-Santa Maria-Goleta, CA5.912.923.31
Santa Cruz-Watsonville, CA7.574.244.74
Santa Fe, NM3.132.682.69
Santa Rosa-Petaluma, CA6.023.263.70
Savannah, GA1.861.551.48
Scranton--Wilkes-Barre, PA1.571.471.54
Seattle-Bellevue-Everett, WA2.692.022.00
Sebastian-Vero Beach, FL2.171.031.45
Sheboygan, WI1.541.391.42
Sherman-Denison, TX1.351.091.33
Shreveport-Bossier City, LA1.281.171.26
Sioux City, IA-NE-SD1.131.071.15
Sioux Falls, SD1.391.431.37
South Bend-Mishawaka, IN-MI1.171.081.19
Spartanburg, SC1.501.351.53
Spokane, WA2.091.731.64
Springfield, IL1.261.091.33
Springfield, MA2.311.781.87
Springfield, MO1.481.391.46
Springfield, OH1.451.121.40
St. Cloud, MN1.911.551.50
St. George, UT3.472.432.41
St. Joseph, MO-KS1.331.161.22
St. Louis, MO-IL1.621.341.39
State College, PA1.991.911.79
Steubenville-Weirton, OH-WV1.311.131.22
Stockton, CA4.851.762.48
Sumter, SC1.521.471.53
Syracuse, NY1.371.261.33
Tacoma, WA2.611.792.00
Tallahassee, FL2.651.811.99
Tampa-St. Petersburg-Clearwater, FL2.811.451.72
Terre Haute, IN1.271.051.27
Texarkana, TX-Texarkana, AR1.201.051.31
Toledo, OH1.501.131.41
Topeka, KS1.281.121.23
Trenton-Ewing, NJ2.361.691.66
Tucson, AZ2.911.651.92
Tulsa, OK1.231.251.39
Tuscaloosa, AL1.851.791.85
Tyler, TX1.351.231.37
Utica-Rome, NY1.521.441.43
Valdosta, GA1.681.521.57
Vallejo-Fairfield, CA5.031.942.85
Victoria, TX1.091.111.22
Vineland-Millville-Bridgeton, NJ1.981.571.46
Virginia Beach-Norfolk-Newport News, VA-NC2.411.991.72
Visalia-Porterville, CA3.241.391.91
Waco, TX1.271.121.29
Warner Robins, GA1.491.331.53
Warren-Troy-Farmington Hills, MI1.931.111.69
Washington-Arlington-Alexandria, DC-VA-MD-WV2.851.871.75
Waterloo-Cedar Falls, IA1.251.111.11
Wausau, WI1.401.351.36
Wenatchee-East Wenatchee, WA2.592.572.20
West Palm Beach-Boca Raton-Boynton Beach, FL2.701.251.50
Wheeling, WV-OH1.301.151.24
Wichita Falls, TX0.960.881.04
Wichita, KS1.171.171.27
Williamsport, PA1.611.541.56
Wilmington, DE-MD-NJ2.502.051.87
Wilmington, NC3.052.722.26
Winchester, VA-WV3.021.922.06
Winston-Salem, NC1.731.651.68
Worcester, MA2.321.561.76
Yakima, WA1.791.661.66
York-Hanover, PA2.041.801.69
Youngstown-Warren-Boardman, OH-PA1.150.891.13
Yuba City, CA3.441.731.98
Yuma, AZ2.601.681.66

Source: Fiserv, Inc., Federal Housing Finance Agency, Moody's Analytics

Here are the tables. Thanks to Moody's Analytics for providing the data, which are based home price numbers from the Case-Shiller Index.

For More: See our post from February, which lists similar data from earlier in 2010.

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