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How Much Home the Rent Buys in the 40 Most Expensive U.S. Cities

How Much Home the Rent Buys in the 40 Most Expensive U.S. Cities

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

In March, FREEandCLEAR released our first analysis of how much home you could buy based on the median rent in the 20 most expensive U.S. cities.  The analysis sparked a lot of interest and touched upon important issues such as sky rocketing rents and housing affordability.  Due to positive feedback and constructive input we have updated the analysis to reflect current interest rates and rents and expanded the analysis from 20 cities to 40 to cover more of the country.  Our objective for the analysis is to promote borrower awareness and education while at the same time shining a spotlight on just how expensive it is to rent or buy a home in major cities across the country.

As a refresher, our analysis uses the median rent by city according to apartment listing website Zumper.com and determines the mortgage equivalent based on the median rent.  In short, the mortgage equivalent is what size mortgage you could afford if your monthly mortgage payment was the same as your monthly rent payment.  For example, instead of paying $3,590 a month for rent in San Francisco (for a one bedroom apartment!!!), what size mortgage could you afford based on a $3,590 mortgage payment?  We use our Rent Payment Mortgage Affordability Calculator to determine the mortgage equivalent for all 40 cities based on current interest rates. 

As we highlighted in our first analysis, it is important for borrowers to recognize that your mortgage payment is only one component of total monthly housing expense, which also includes property taxes, homeowners insurance and other applicable housing-related costs. The mortgage tax benefit, however, provides a financial cushion that can offset part or all of these costs.

The table below shows the mortgage equivalent for the cities based median rent, with San Francisco topping the chart at approximately $800,000  and El Paso coming in at number 40 with a mortgage equivalent of approximately $147,000 (based on $660 in rent).  The chart demonstrates the large mortgage amounts renters in many cities could afford and illustrates the wide gap between the most expensive and less expensive cities in stark fashion.

City Median Rent
One Bedroom
Mortgage
Equivalent
1 San Francisco $3,590 $799,475
2 New York $3,250 $723,759
3 San Jose $2,290 $509,972
4 Boston $2,280 $507,745
4 Oakland $2,270 $505,518
6 Washington $2,270 $505,518
7 Los Angeles $1,970 $438,709
8 Miami $1,850 $411,986
9 Seattle $1,790 $398,624
10 Chicago $1,740 $387,489
11 San Diego $1,500 $334,042
12 Portland $1,310 $291,730
13 Philadelphia $1,280 $285,050
14 Atlanta $1,270 $282,823
15 Minneapolis $1,260 $280,596
16 Denver $1,220 $271,688
17 Baltimore $1,200 $267,234
18 Long Beach $1,200 $267,234
19 Dallas $1,190 $265,007
20 Austin $1,130 $251,645
21 Houston $990 $220,468
22 Nashville $990 $220,468
23 Sacramento $990 $220,468
24 Charlotte $970 $216,014
25 Raleigh $910 $202,652
26 Virginia Beach $900 $200,425
27 San Antonio $890 $198,199
28 Fort Worth $850 $189,291
29 Milwaukee $840 $187,064
30 Jacksonville $830 $184,837
31 Phoenix $830 $184,837
32 Fresno $800 $178,156
33 Las Vegas $780 $173,702
34 Mesa $760 $169,248
35 Colorado Springs $750 $167,021
36 Omaha $750 $167,021
37 Kansas City $740 $164,794
38 Arlington $730 $162,567
39 Louisville $720 $160,340
40 El Paso $660 $146,979
Source: Zumper (Median Rent). Based on interest rate of 3.500%

Just because you can afford a monthly mortgage payment does not mean you can qualify for a mortgage.  Multiple factors including your credit score, financial profile, lender qualification requirements, down payment and other inputs determine your ability to qualify for a mortgage. And most people who go from renting to having a mortgage can tell you it is usually significantly harder to qualify for a mortgage than a lease.  Mortgage lenders also use debt-to-income ratios to determine what size mortgage borrowers can afford, which causes many prospective home buyers to focus on how much money they need to make to qualify for a mortgage.

The table below shows the annual gross income required to qualify for the mortgage equivalent in each city.  For example, to qualify for an approximately $725,000 mortgage in New York requires approximately $130,000 in annual gross income as compared to approximately $28,500 in gross income for an approximately $160,000 mortgage in Louisville.  Because lenders look at an applicant’s debt in addition to their income we assumed a level of borrower debt as a percentage of income for the analysis.     

The analysis shows that in 36 of the 40 cities, or 90% of cities, the median gross income is higher than the required income to qualify for a mortgage which implies that more renters should consider buying homes.  For the four cities where the median gross income is lower than the required income to qualify for a mortgage, the sizeable gaps (New York (~$48,000), San Francisco (~$35,000), Miami (~$16,000) and Los Angeles (~$10,000)) imply that the percentage of renters who actually make enough money to qualify for a mortgage to buy a home is much lower than in the other cities.

City Mortgage
Equivalent
Required Annual
Gross Income
City Median
Gross Income
1 San Francisco $799,475 $142,404 $107,700
2 New York $723,759 $128,928 $80,700
3 San Jose $509,972 $90,828 $107,700
4 Boston $507,745 $90,432 $98,100
4 Oakland $505,518 $90,036 $95,800
6 Washington $505,518 $90,036 $109,200
7 Los Angeles $438,709 $78,132 $67,900
8 Miami $411,986 $73,404 $57,500
9 Seattle $398,624 $71,004 $90,300
10 Chicago $387,489 $69,036 $76,900
11 San Diego $334,042 $59,496 $73,500
12 Portland $291,730 $51,972 $73,900
13 Philadelphia $285,050 $50,772 $81,100
14 Atlanta $282,823 $50,364 $68,300
15 Minneapolis $280,596 $49,968 $86,600
16 Denver $271,688 $48,396 $80,100
17 Baltimore $267,234 $47,604 $89,600
18 Long Beach $267,234 $47,604 $67,900
19 Dallas $265,007 $47,196 $71,700
20 Austin $251,645 $44,832 $77,800
21 Houston $220,468 $39,264 $69,300
22 Nashville $220,468 $39,264 $68,500
23 Sacramento $220,468 $39,264 $71,500
24 Charlotte $216,014 $38,472 $67,200
25 Raleigh $202,652 $36,096 $78,800
26 Virginia Beach $200,425 $35,700 $70,900
27 San Antonio $198,199 $35,304 $63,400
28 Fort Worth $189,291 $33,732 $70,400
29 Milwaukee $187,064 $33,336 $73,300
30 Jacksonville $184,837 $32,928 $64,900
31 Phoenix $184,837 $32,928 $64,000
32 Fresno $178,156 $31,728 $49,500
33 Las Vegas $173,702 $30,936 $59,800
34 Mesa $169,248 $30,132 $64,000
35 Colorado Springs $167,021 $29,772 $73,000
36 Omaha $167,021 $29,772 $72,800
37 Kansas City $164,794 $29,364 $73,300
38 Arlington $162,567 $28,968 $70,400
39 Louisville $160,340 $28,572 $67,000
40 El Paso $146,979 $26,172 $47,600
U.S. Median Annual Gross Income $65,700
Source: Required income assumes borrower debt and standard debt-to-income ratio.  Median income data uses the greater of HUD or FHFA median family income.

The chart below takes the analysis one step further and shows how the mortgage equivalent translates into home price for each city. So basically what price home you can afford based on the median rent, assuming you make a 20% down payment.  For example, based on the median rent in Los Angeles, the mortgage equivalent is approximately $440,000, and assuming you make a 20% down payment you could buy an approximately $550,000 home

It is important to highlight two points about the home price equivalent.  First, it is certainly possible to buy a home with a down payment of less than 20% and we are strong advocates of low or no down payment mortgage programs that make home ownership more attainable.  Second, saving sufficient funds for a down payment (for example, ~$200,000 in San Francisco) is one of the biggest obstacles to buying a home so this is where the leap from renting to buying breaks down for many borrowers, especially in more expensive markets where higher rents make it harder to save for a down payment.

Despite the practical limitations for borrowers, the analysis reflects several interesting housing market trends.  In 30 of the 40 cities, home price based on rent is higher than median home price which suggests that more renters could afford to buy homes in those cities.  Cities with a home price based on rent lower than the median home price may have less affordable housing inventory for renters who want to buy.   The analysis also shows the widening disparity in property values and affordability across different markets with the highest priced market, San Francisco with home price equivalent of $999,344, being more than five times more expensive than the number 40 market, El Paso with a home price equivalent of $183,724. 

City Mortgage
Equivalent
Home Price
Equivalent
City Median
Home Price
1 San Francisco $799,475 $999,344 $770,300
2 New York $723,759 $904,699 $467,900
3 San Jose $509,972 $637,465 $970,000
4 Boston $507,745 $634,681 $378,500
4 Oakland $505,518 $631,898 $770,300
6 Washington $505,518 $631,898 $370,400
7 Los Angeles $438,709 $548,386 $458,900
8 Miami $411,986 $514,983 $286,700
9 Seattle $398,624 $498,280 $383,100
10 Chicago $387,489 $484,361 $208,600
11 San Diego $334,042 $417,553 $554,300
12 Portland $291,730 $364,663 $326,700
13 Philadelphia $285,050 $356,313 $203,900
14 Atlanta $282,823 $353,529 $167,800
15 Minneapolis $280,596 $350,745 $222,800
16 Denver $271,688 $339,610 $369,000
17 Baltimore $267,234 $334,043 $229,200
18 Long Beach $267,234 $334,043 $458,900
19 Dallas $265,007 $331,259 $210,100
20 Austin $251,645 $314,556 $269,700
21 Houston $220,468 $275,585 $208,000
22 Nashville $220,468 $275,585 $204,700
23 Sacramento $220,468 $275,585 $297,600
24 Charlotte $216,014 $270,018 $190,300
25 Raleigh $202,652 $253,315 $233,400
26 Virginia Beach $200,425 $250,531 $198,000
27 San Antonio $198,199 $247,749 $195,500
28 Fort Worth $189,291 $236,614 $210,100
29 Milwaukee $187,064 $233,830 $208,000
30 Jacksonville $184,837 $231,046 $195,000
31 Phoenix $184,837 $231,046 $223,100
32 Fresno $178,156 $222,695 $215,000
33 Las Vegas $173,702 $217,128 $222,500
34 Mesa $169,248 $211,560 $223,100
35 Colorado Springs $167,021 $208,776 $239,800
36 Omaha $167,021 $208,776 $157,700
37 Kansas City $164,794 $205,993 $163,300
38 Arlington $162,567 $203,209 $370,400
39 Louisville $160,340 $200,425 $148,100
40 El Paso $146,979 $183,724 $137,500
U.S. Median Existing Home Price $232,500
U.S. Median New Home Price $321,100
Source: Home price equivalent assumes 20% down payment.  City and U.S. median existing home price data from National Association of Realtors. Median new home price from U.S. Census.

The analysis up to this point has been based on the median rent for a one bedroom apartment in each city but how much mortgage and home could you afford based on the rent for a two bedroom apartment?

The table below shows the mortgage equivalent, home price equivalent and the annual gross income required to qualify for a mortgage based the median rent for a two bedroom apartment.  Once again, San Francisco tops the list with an eye-popping home price equivalent of $1.335 million (as compared to ~$1.275 million in March) based on $4,800 in monthly rent.  The significant home price equivalents for many cities in the table below reinforces the one bedroom rent analysis and underscores that more renters could consider buying homes.

City Median Rent
Two Bedroom
Mortgage
Equivalent
Home Price Equivalent Required Annual Gross Income
1 San Francisco $4,800 $1,068,936 $1,336,170 $190,404
2 New York $3,690 $821,744 $1,027,180 $146,364
3 Washington $3,150 $701,489 $876,861 $124,968
4 San Jose $2,910 $648,042 $810,053 $115,428
5 Los Angeles $2,900 $645,815 $807,269 $115,032
6 Oakland $2,750 $612,411 $765,514 $109,104
7 Boston $2,620 $583,461 $729,326 $103,932
8 Miami $2,550 $567,872 $709,840 $101,172
9 Chicago $2,430 $541,149 $676,436 $96,396
10 Seattle $2,370 $527,787 $659,734 $93,996
11 San Diego $2,100 $467,659 $584,574 $83,304
12 Denver $1,730 $385,262 $481,578 $68,628
13 Long Beach $1,700 $378,581 $473,226 $67,428
14 Portland $1,630 $362,993 $453,741 $64,668
15 Dallas $1,620 $360,766 $450,958 $64,272
16 Atlanta $1,600 $356,312 $445,390 $63,468
17 Austin $1,490 $331,816 $414,770 $59,100
18 Minneapolis $1,460 $325,135 $406,419 $57,900
19 Philadelphia $1,440 $320,681 $400,851 $57,132
20 Baltimore $1,410 $314,000 $392,500 $55,932
21 Houston $1,230 $273,915 $342,394 $48,804
22 Nashville $1,200 $267,234 $334,043 $47,604
23 Charlotte $1,200 $267,234 $334,043 $47,604
24 Virginia Beach $1,180 $262,780 $328,475 $46,800
25 San Antonio $1,120 $249,418 $311,773 $44,436
26 Sacramento $1,110 $247,191 $308,989 $44,028
27 Phoenix $1,050 $233,830 $292,288 $41,664
28 Raleigh $1,030 $229,376 $286,720 $40,872
29 Jacksonville $1,000 $222,695 $278,369 $39,672
30 Fort Worth $990 $220,468 $275,585 $39,264
31 Milwaukee $980 $218,241 $272,801 $38,868
32 Colorado Springs $980 $218,241 $272,801 $38,868
33 Omaha $970 $216,014 $270,018 $38,472
34 Las Vegas $950 $211,560 $264,450 $37,704
35 Arlington $940 $209,333 $261,666 $37,296
36 Mesa $930 $207,106 $258,883 $36,900
37 Fresno $880 $195,972 $244,965 $34,896
38 Kansas City $870 $193,745 $242,181 $34,500
39 Louisville $830 $184,837 $231,046 $32,928
40 El Paso $790 $175,929 $219,911 $31,332
Source: Zumper (Median Rent). Mortgage equivalent based on interest rate of 3.625%.  Home price equivalent assumes 20% down payment.  Required income assumes borrower debt and standard debt-to-income ratio

Multiple personal and financial inputs go into the decision of whether to rent or buy a home and we hope this analysis enables people to to better compare their options.   With rising rents and multi-year low interest rates, prospective buyers may be more willing to take the home ownership leap, especially when they understand how much home they can buy with their rent.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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