Price to Rent Ratios

Calculating a price-to-rent ratio

Calculating a price-to-rent ratio is straightforward. You take the median real estate sales price in your area and divide by the median annual rent amount, giving you the price-to-rent ratio.

For example, if home sales average $250,000, and the average median rent is $1,200/month, you would do the calculation like this:

Median house price ($250,000) / Median annual rent ($1,200 x 12 = $24,000) = 10.4

Easy, right? But how do we know what 10.4 means, and how does this compare to other areas across the country?

The lower the price-to-rent ratio, the more favorable the environment is for buying a home vs. renting. A higher ratio indicates that property prices are high compared to rents and that renting may be a better option.

The data

SoFi Technologies (SOFI -5.44%) recently looked at 52 large cities in the U.S. and compared their price-to-rent ratios. Not surprisingly, cities like San Jose and San Francisco came in near the top, with price-to-rent ratios of 45 and 36, respectively.

On the flip side, though, Detroit (8), Baltimore (13), Chicago (15), and Philadelphia (14) came in with some of the lowest price-to-rent ratios.

The impact of low rates and flat rents

One drawback of the price-to-rent ratio is that it doesn’t account for lower interest rates, which can make owning a home more affordable. A typical monthly mortgage payment can change dramatically based on the interest rate, which isn't accounted for in the price-to-rent ratio.

The price-to-rent ratio also doesn't account for living affordability across various markets. For instance, the cost of living in Missouri vs. New York City or San Francisco will be dramatically different.

Unfortunately, living in America in 2025 is very expensive almost everywhere. The cost of purchasing a house is up, interest rates are up, and rents are way up.

Where to find price-to-rent ratios

There are a number of platforms that will give you a better idea of the different price-to-rent ratios in your real estate market. The easiest way is to calculate it yourself by using Census Bureau median home prices, and your own rental data in your portfolio. Otherwise, you can draw that data from platforms like Zumper, or Apartment List (or Rentals.ca for our Canadian friends).

You need your average price, which can be at the state or neighborhood level. Ideally, you would get as granular as possible to get the most accurate number. Prices in one location vs. another can change dramatically. The same goes for rents -- try to get as local as possible in your data.

Here are a few other websites that can help you find the data needed to make your calculation:

• Zillow: Its research center can give you data on average prices as well as rents across various markets in the U.S.
• Redfin: Similarly, Redfin has a data center that gives you the data required to make a price-to-rent calculation.
• NAR: You can subscribe to or keep an eye on the National Association of Realtors' Economists' Outlook, which regularly publishes data related to prices and rents.