The San Francisco and San Jose metropolitan areas have the highest ratios in the nation and recent data shows the figures are the highest they’ve been in the past two decades. The only time the ratios came even close to where they are now was right before the housing market crash in 2008.
If the price-to-rent ratio is low in an area, that means market conditions indicate it’s better to buy a home. If that ratio is high, renting is more favorable.
SmartAsset had three Bay Area cities in their top five highest price-to-rent ratios list in a report earlier this year, with San Jose taking the top spot with a ratio of 42.2. That meant that between March 2021 and February 2022, with San Jose’s average annual rent at $29,929 and an average home sale price of $1.26 million, that home costs 42.2 times more than a year’s worth of rent.
Any ratio over 21 typically means that renting is more advantageous. San Francisco has a ratio of 37.3 and came in second in SmartAsset’s analysis, while Oakland came in fifth with a ratio of 32. A ratio of 1 to 15 means buying is more favorable.
While the ratio is a helpful indicator, it shouldn’t be the only consideration taken into account when evaluating the housing market. Individual factors like income, downpayment availability and how long you plan to own the property all play heavily into whether it’s the “right time” to get into the real estate market or not.
Article source: https://www.sfgate.com/realestate/article/Bay-Area-highest-gap-price-to-rent-in-nation-17355089.php