Rent Or Buy In These Top 15 Major American Cities


What Renting And Buying Looks Like In These 15 US Cities

Looking for a place to live is no easy feat—especially when housing markets fluctuate with every turn of the tide. One of the biggest mistakes people make when shopping for a home is not considering the housing situation in their city. That is, every area has their own unique renting and buying markets. While buying remains 38% cheaper than renting on average, home prices can shoot up or plunge unexpectedly, making renting a smarter choice in some areas. So, if buying a property is the best way to go in one town, it might not be the case for the next town over. How do you know if you should rent or buy? We took a closer look at the housing markets in 15 of the largest US cities to help you figure out just that.

SEE ALSO: 5 Best States to Own a Home

San Francisco, California

  • Median Home Sales Price: $825,000 (Trulia - Feb 2014)
  • Median Rent for a two-bedroom apartment: $3,350 (Trulia - Feb 2014)
  • Unemployment Rate: 5.6% (2013 Bureau of Labor Statistics)
  • % Tenant Occupied: 64% (2012 Census)
San Francisco is the most expensive city to live in the US and has the largest income disparity of any city. The city has a booming technology industry with loads of start-ups and is in close proximity to the headquarters for many industry leaders. It is also ranked among the best cities in the US for quality of life, health, dining options and nightlife. The well-educated and high-income tech workers who want to live in San Francisco are given the option by companies like Google that offer free transportation to jobs outside the city. With a rapidly growing population of high-income workers, rents are 3 times the national average and only 14% of homes are affordable to the middle-class. While the median income in SF is well above the national average, the price appreciation of housing far outweighs the recent gains in income. Most people in San Francisco are cost burdened by their rents, meaning they pay more than 30% of their income to housing costs.

Buy or Rent?

Purchase price appreciation has been so drastic in the last year that it’s a tough call in San Francisco. Even with conservative mortgage rate expectations, buying a home yields only 13% savings compared to renting. For those who are risk-averse or may not stay for 7+ years, rent!

New York City, NY

  • Median Home Sales Price: $1,240,000
  • Median Rent for a two-bedroom apartment:$3,000
  • Unemployment Rate: 6.6%
  • % Tenant Occupied: 68%
Year after year, New York City is ranked among the most expensive cities to live in, if not the most expensive city. In the last year, San Francisco overtook that title but New York remains a close second. A renter-heavy city, the competition is brutal with vacancy rates at just 1.62%. In the last year, rental prices have increased by 3%, with the median rent in January for a 2-bedroom apartment at $3,000. In 2014, over 3,000 new rental units are set to be built which will hopefully (if only slightly) ease the pressure within a fiercely competitive market. The median sales price for a home in New York City is currently up 26% from last year at a whopping $1.24 million dollars. The record-setting prices are a product of low inventory throughout the city that has incited bidding wars. Only 25% of available homes are now affordable to the middle class. Though developments are underway to expand the inventory, most of the projects consist of luxury real estate. Due to soaring land costs, high end housing is the only way to be profitable.

Buy or Rent?

Rent. Whether buying or renting, New York is outrageously expensive. Even with conservative expectations regarding length stay and mortgage rates, it is only 22% cheaper to buy than rent in New York. Technically,buying is cheaper, but a risk-averse person may find it safer to rent.  

Boston, MA

  • Median Home Sales Price: $410,000
  • Median Rent for a two-bedroom apartment:$2,350
  • Unemployment Rate: 5.9%
  • % Tenant Occupied: 67%
Boston has a constant influx of well-educated students due to the area’s colleges and universities, as well as a growing biotechnology sector that attracts well-paid workers. Due to a limited supply of rental housing, vacancy rates average 3%. In November, rents in Boston increased by 1.4% from the previous year and have continued to increase since. The buyers’ market also suffers from an inventory shortage, and has seen 22 straight months of inventory decline. The lack of available homes drove bids up over the asking price on more than 30% of homes last year. The continued combination of buyer demand and a shortage of inventory resulted in prices rising by 5% in February. The lack of homes on the market is especially problematic in certain price ranges, for buyers who may want to stay below the $400,000 or $500,000 mark. As of October 2013, only 41% of available homes were affordable for the middle-class.

Buy or Rent?

Buy. Boston home prices are increasing quickly relative to rents, but renting is still more expensive than buying. Buyers save 30% relative to renters.  

Washington, D.C

  • Median Home Sales Price: $481,500
  • Median Rent for a two-bedroom apartment:$2,000
  • Unemployment Rate: 4.6%
  • % Tenant Occupied: 58%
Washington, D.C., our nation’s capital and the center for all three branches of the federal government, is expected to provide 58,100 new jobs this year (an annual increase of 1.9%). The city’s steady stream of government jobs has attracted young professionals and created a tight rental housing market. In the past year 10,000 apartment units were built and another 18,000 are expected this year in order to meet the housing needs. The increased supply has increased vacancy rates and rents havedecreased by 1.4% in the last year. It is expected that rents will continue to decrease as more units are added. Conversely, D.C. has seen consecutive prices gains in the housing market for the past 24 months. In January, prices were up 9.4% even though overall sales saw a slight decline. Unlike the rental market, theinventory of for-sale homes in D.C. has been low which is causing the decline in sales. Luckily, in the past month thousands of homes have gone up for sale which should encourage buyer enthusiasm.

Buy or Rent?

Buy. Though rents have fallen in the last year while prices have risen, renting is still less affordable than buying. Deciding to buy instead of rent will save 34%.

Seattle, WA

  • Median Home Sales Price: $399,000
  • Median Rent for a two-bedroom apartment:$1,650
  • Unemployment Rate: 5.4%
  • % Tenant Occupied: 54%
Seattle has a reputation for being an artsy city full of coffee-lovers. But the lesser acknowledged fact is that Seattle is home to Microsoft and Amazon, which makes it the second largest tech hub in the metropolitan US. Not surprisingly, these tech giants have attracted well-educated and well-paid workers to the city, giving the area an unemployment rate that is almost 2% below the national average. The median home price of $399,000 is up 16.6% from the previous year, and is expected to increase another 5% by the end of the year. The price appreciation is almost 60% higher than the national median; however, the median income of Seattle makes it a much more affordable city than other tech hubs. The city also has a noticeable increase in renters, and prices have gone up by 9.2% in the last year. It is expected that rental demand will grow by another 40,000 people in 2014. While construction hopes to catch up with demand, gentrification is becoming evident across the city. With a tight inventory of rentals units and price appreciation, previously low-income areas are giving way to luxury high-rise apartments.

Buy or Rent?

Buy. Rent appreciation in Seattle is staggeringly high and rental prices are expected to increase again this year. Buying is now 34% cheaper in Seattle.

Miami, FL

  • Median Home Sales Price: $195,000
  • Median Rent for a two-bedroom apartment:$2,300
  • Unemployment Rate: 6.0%
  • % Tenant Occupied: 68%
Recognized primarily for its beaches and tropical weather, many are surprised to find out that Miami is a center for international trade and finance. It has the largest concentration of international banks in the US, as well as thriving retail and hospitality industries. Last year, job growth spiked 5% and the real estate market saw its third consecutive year for record home sales. Housing prices appreciated by 15.1% from last November and residential real estate sales increased by 11.6% in January. Rents increased by 7.3% in the last year, and are expected to continue increasing as vacancy rates are the third lowest in the county. Developers plan to complete 2,000 new apartments this year to keep up with the demand, which will be easily absorbed given the expectation for 23,500 additional jobs in 2014.

Buy or Rent?

Buy. Miami is an interesting case. Given the median price of a home, rents are unusually high and likely to get higher. Even though purchase prices are increasing more rapidly than rents, it is currently 38% cheaper to buy than rent.

Austin, TX

  • Median Home Sales Price: $594,239 (Average List Price – Feb 14)
  • Median Rent for a two-bedroom apartment:$1,350 (Jan 14)
  • Unemployment Rate: 4.5%
  • % Tenant Occupied: 55%
Austin is fitting into its stereotype as a booming tech industry, with a large presence of post-college grads. The unemployment rate of 4.5% is one of the lowest in the nation, and the labor market is projected to get even stronger. Accenture, AT&T, National Instruments, and Time Warner Cable have all announced plans to add significant jobs in the city. Forbes ranked Austin the #1 best city for doing business in 2013. In January there was a steep decline in institutional investor purchases around the US; however, in Austin the institutional share rose a startling 162% to reach nearly a fifth of all home purchases. Both home and rental prices have jumped up by more than 10% from last year. But even with the price appreciation, Austin’s median income level in comparison to the median price of rent makes it a relatively affordable city, especially for a tech hub!

Buy or rent?

Buy. Austin continues to grow in popularity as well as economic strength. Rents and prices will both go up in the next year, but buying remains the safer choice. It is currently 30% cheaper to buy than rent in Austin.

SEE ALSO: 5 Questions You Need To Ask At An Open House

Portland, OR

  • Median Home Sales Price: $285,000
  • Median Rent for a two-bedroom apartment: $1,150
  • Unemployment Rate: 6.2%
  • % Tenant Occupied: 47%
Portland is ranked among the best cities for dining out, and has more micro-breweries than any city in the world. In addition, the city boasts incredible natural beauty with miles of hiking trails and parks. Its popularity is evident by the population increase of 25,000 residents just last year. There is a growing demand for both home sales and rentals. The median sales and rental prices are both up by more than 10% from last November. Rental vacancy is now the second lowest in the nation, hovering at or below 3%. The city hopes to ease the unmet rental demand with plans for 6,000+ units to be constructed in 2014.

Buy or Rent?

Buy. Rent increases are almost as drastic as price increases, hurting affordability in terms of income. Buying is now 32% cheaper than renting in Portland.

CONTINUE TO PART 2: Rent or Buy In These Popular Cities

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