It’s probably no surprise that California’s Bay Area is not cheap. The region is one of the priciest places in everything from going to a game, to buying groceries, to owning a car to the overall cost of living. But it’s also one of the most expensive places to actually live, whether you’re buying a house or renting an apartment.
Those are some stratospheric costs to live in Bay Area. Prices are high in every one of its four regions: San Francisco, Oakland/Berkeley, San Jose and San Rafael. But how do the pricey rents in those areas compare to the costly home prices?
Bay Area renters are saving up to $2,000 per month compared to home buyers
As expected, rent prices and monthly mortgages are both high throughout much of California. But in particular, things are substantial in the Bay Area. Across the four metro areas that make up the region, rent prices are north of $3,100 a month for an average apartment. As well, median home sales prices fall between a million and a million-five.
While both paying for apartments and homes are high, there’s an interesting pattern that emerges when compared to each other. The top three cities in the nation where rent prices are most favorable compared to monthly mortgages are all in the Bay Area: San Francisco, San Rafael and San Jose. Even slightly-more-affordable Oakland offers cheaper rents than mortgages, ranked number 18 overall.
In fact, among those top three cities all in the Bay Area, it’s cheaper to rent than buy by over $1,500 a month.
In San Francisco, which comes in at number one, the average rent is $3,218 a month, whereas an average monthly mortgage is $5,201. So renters get the better end of the deal by nearly $2,000. Apartment dwellers save almost $24,000 a year in housing costs compared to those homeowners in a city where home prices average over a million and a half dollars.
In No. 3, San Jose has an average monthly mortgage of $4,614. That’s $1,510 more than the average rent per month which runs a comparative $3,104. Even across the Bay in Oakland, the “cheap” Bay Area alternative, an average rent of $3,218 is still $77 cheaper a month than the average homeowner pays.
Of course, keep in mind the relativity. The Bay Area still carries the fourth highest rents of any metro area and four of the five highest home prices.
There’s also value for renters in the Pacific Northwest and the South
Where are the best values for renters outside of the Bay Area bubble? In general, the further west you go, the better prices are for renters.
Large metro areas on the east coast are rife with gleaming apartment towers elbowed into small spaces. Out West and down South, even in big cities, life is more spread out and low-slung. Homes are generally more expensive, and a mansion in Bel Air holds more cache than a penthouse on the Upper West Side. This keeps rents relatively more affordable.
The 19 metro areas with the most value in renting vs. buying
- San Francisco, CA ($1,983 saved monthly by renting)
- San Rafael, CA ($1,555 saved monthly by renting)
- San Jose, CA ($1,510 saved monthly by renting)
- Nacogdoches, TX ($555 saved monthly by renting)
- Santa Cruz, CA ($476 saved monthly by renting)
- Salinas, CA ($476 saved monthly by renting)
- Kingsport, TN ($438 saved monthly by renting)
- Johnson City, TN ($426 saved monthly by renting)
- Santa Maria, CA ($264 saved monthly by renting)
- Decatur, AL ($255 saved monthly by renting)
- Flagstaff, AZ ($229 saved monthly by renting)
- Watertown, WI ($195 saved monthly by renting)
- Chico, CA ($181 saved monthly by renting)
- Coeur d’Alene, ID ($178 saved monthly by renting)
- Milledgeville, GA ($135 saved monthly by renting)
- Seattle, WA ($128 saved monthly by renting)
- Statesboro, GA ($80 saved monthly by renting)
- Oakland, CA ($77 saved monthly by renting)
- Ogden, UT ($31 saved monthly by renting)
Buying makes more sense in the Northeast
On the other side of the coin, homeowners are really getting the better of the bargain in the Northeast. The I-95 corridor is home to some very expensive rents. But it’s also the region where home prices offer better affordability. In fact, of the 25 cities where monthly mortgage payments average over a thousand dollars less than rents, 17 are in the Northeast Corridor.
While nearly every major northeastern metro area falls into the top 25 that swing best for homeowners – New York, Philadelphia, Wilmington, Bridgeport, Boston, Long Island and more – the number one metro is a little more surprising. With mortgage rates averaging nearly $2,000 a month less than rents, the best value for buying a house is in Rockingham County, NH. The slightly bucolic county is home to towns like Derry, Hampton and Portsmouth and sits about 90 minutes north of downtown Boston.
The two urban areas with the largest difference in favor of home purchasers are both in New Jersey. In New Brunswick in Central Jersey, rents are $1,825 higher a month than mortgage payments. In Newark, the state’s largest city, it’s $1,681.
Value for homeowners outside of the Northeast
The fourth widest ratio is actually outside of the northeast. Renters in the Chicago suburb of Elgin pay $1,400 a month more in rent than homeowners do in mortgage payments. It’s one of three Chicago-area metros in the top dozen which includes the northern suburbs of Lake County and Chicagoland itself.
Another outlier, the state of Florida offers up three regions among the top 21. Fort Lauderdale is the fifth-best value city for mortgagers, where rents average $2,447 while an average monthly mortgage payment is just $1,356. Its neighbors West Palm Beach and Miami both have over a $1,000 split in homeowners’ favor.
Methodology
We compared the difference between average rent prices in more than 200 regions and core-based statistical areas (CBSA) in the nation to the median monthly mortgage payments in the same areas. For the purpose of this study, we are referring to our regions and CBSAs as “metro areas.”
Average rent prices are based on the average of all unit types in a metro area from Apartment Guide and Rent.’s multifamily inventory as of May 2021.
Monthly mortgage payments are based on the cost of a median sale price in a metro area in May 2021 from Redfin’s Data Center, factoring in a 20 percent down payment at an interest rate of 2.96 percent. We used a 20 percent down calculation to avoid additional monthly fees from mortgage insurance, or PMI.
The rent and mortgage information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment or house.
