- January 24, 2022
A study by Roofstock examined metropolitan statistical areas that have the highest rent-to-price ratios — one metric potential buyers use to assess if continuing to rent is more viable than trying purchase a home. With both real estate and rental prices rising quickly over the past two years, renters are left to try to stretch their budgets to purchase homes that rapidly increased in price, or to live with rising rents and risk home values climbing further out of reach.
In markets where the ratio of rents to the cost of home ownership are higher, purchasing is a better option, whereas those with lower rent-to-price ratios, where costs of homeownership exceeds rent, homes may be overvalued.
According to the data, rent remains a lower-cost option to purchasing in several areas in the region.
Take the North Port-Sarasota-Bradenton area. As challenging as rents are there, at No. 68 among the country’s mid-size MSAs it ranks among the lowest rent-to-price ratios among its Florida counterparts. With a median rent of $1,588 and an average monthly mortgage payment of $2,211 for a median home price of $502,186, the rent-to-price ratio is 3.79%. That's well behind the 5.16% ratio of Ocala, which ranks No. 32 nationally and the most advantageous home purchase value in the state compared to rent.
That compares to a national average ratio of 4.8% with a median rent of $1,435 and a mortgage payment of $1,567 for a median home price of $355,852.
To find the locations with the highest rent-to-price ratios, Roofstock used data from the Department of Housing and Urban Development, Zillow and the U.S. Census Bureau. The rent-to-price ratio was calculated as the ratio of annualized median rent from HUD to Zillow’s current Home Value Index. For additional context, the monthly mortgage payment for a median-price home was calculated assuming a 30-year fixed mortgage, a 20% down payment and an interest rate at 5.22%.