Given the long-term costs of buying or renting a home in San Jose, it’s far cheaper to pay the landlord.
In the South Bay city, the median home price in June was $1.5 million — more than twice the typical $715,000 cost of renting for 20 years, the San Francisco Chronicle reported, citing figures from Zillow and Apartment List.
The price-to-rent ratio was 2.2, the highest among the 100 most populous metropolitan markets in the U.S. The San Jose price-to-rent ratio in June 2019 was 1.6.
In greater San Francisco, the median home price in June was $1.2 million — nearly twice the typical $609,000 cost of renting over two decades. In 2019, the ratio was 1.3.
Across the nation., the median home price in June was about the same as the median price for renting a place for 20 years, or $352,000 to buy versus $338,000 to rent.
The difference between home prices and long-term rents across the Bay Area helps explain why many first-time home buyers flock to inland metro areas like Fresno and Stockton, where ratios were just 1.3 in June.
Even affording a mortgage for a “low-priced” home in California now requires an income of more than $140,000, according to the Legislative Analyst’s Office.
Across the state, Los Angeles and San Diego also had some of the nation’s highest price-to-rent ratios.
In greater Los Angeles, the median home price in June was $945,000, nearly twice the typical $528,000 cost of renting over two decades, a ratio of 1.8.
In greater San Diego, the typical home price was $889,000, compared to the $552,000 cost of long-term renting, a ratio of 1.6.
California’s soaring home prices, which reached record levels this year, have for decades outpaced the price growth seen in other parts of the country, according to the Chronicle. The ratio of home prices to rent costs jumped during the pandemic as home prices hit record highs.
Renters were also much more likely to move away from the Bay Area during the pandemic, taking advantage of remote work, Patrick Carlisle, chief market analyst for Compass, told the newspaper.
But homeowners were more prone to stay, while those who did move were usually able to find a buyer for their house.
That, along with low interest rates that caused bidding wars between home buyers, drove home prices up while rents dropped — “which twisted the ratio of home prices to rents out of whack,” Carlisle said.
In some parts of the country, it’s still cheaper to buy than rent.
In greater Chicago, the median price for a home in June was $311,000, while the cost of renting over 20 years was $391,000.
— Dana Bartholomew
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