Overview

Fundamentally, a rent vs. buy index for a particular market tells us whether to expect a higher rate of return on investment by buying and maintaining a home or by renting and investing the difference. Factors considered include typical home vs. rental prices, interest rates vs. the rate of return on investments, upfront & ongoing costs, as well as tax considerations (property, capital gains, and even the vanishing mortgage-interest deduction).

Methodology

Our goal in publishing this analysis is to assist with the financial part of the rent vs. buy decision by structuring a large amount of high-quality data into an easily-digestible visualization that compares relative buy vs. rent levels among U.S. cities. We evaluated & incorporated buy vs. rent data published by Smartasset.com; Numbeo; Beracha, Hardin & Johnson; Trulia; & Zillow.

The calculations for a rent vs. buy index are relatively established, so it was no surprise that each of the five datasets we evaluated used a similar approach. First, they examined average rent and sale prices for the same types of property. Next, they determined the initial and ongoing costs for both renting and owning. After accounting for one-off costs, each firm then looked at net present value to determine the long-term investment value of owning a home vs. renting an apartment and investing the savings.