Rental Market vs. Housing Market: Where to Find the Best Value in Price Per Square Foot

Homes for sale and apartments for rent both come in a variety of sizes, shapes and styles. So how do you make a comparison and even the playing field? The best metric is calculating lease rates and home prices per square foot.

Using this data, we discovered interesting patterns and mined the results for key takeaways summarized below to help renters or buyers understand which locations offer the best values.

Understanding price per square foot

There is an understandable difference in prices to rent for a lease term and to buy for a lifetime. When you break each down into cost per square foot, you can make fair apples and oranges comparisons.

“It’s important for any renter or prospective homebuyer to monitor trends of sale prices per square foot alongside rents (per square foot). These metrics help households compare how affordability is changing in their city (adjusted for home size),” says Taylor Marr, Redfin lead economist.

Apartments rent for as much as five dollars per square foot per month all the way down to just over 80 cents. Meanwhile, homes range from almost a grand at the high end to a basement of around 60 dollars per square foot. Those are more manageable metrics and can easily rank.

It will cost you more to rent in the Northeast but more to buy a home in the Bay Area

The cities where finding a place to live is most expensive include the places you would assume. Think the big city Northeast corridor and sunny California coast. This mostly holds true for renting an apartment or buying a home.

In fact, eight of the 10 most expensive cities for renting or buying per square foot are the same. But how the order of those cities shakes out tells an interesting story. In the big, condensed cities of the Northeast, apartment renters have the priciest options. But along cities out west, it’s home buyers that are paying more per square foot.

New York City is by far the most expensive place to rent, with neighbors to north Boston right behind, while the top three most expensive cities to buy a home exist in the San Francisco Bay Area.

Every city in the top ten among rents and home prices you’ll find on the pricey coasts. The most expensive non-coastal city for renters is expectedly high-priced Chicago at No. 11, and the top interior city for home prices is trendy Denver at 18.

Looking further down, no city in the South appears on either list until Miami, No. 28 highest rent per square foot and 21 for home buying.

Oh and we can’t forget Texas — there’s no Texas city until Dallas is No. 37 for rent and Austin comes in No. 22 for homes.

Rent prices are down in the priciest home buying cities

For renters who want to save some money living in the priciest cities to buy a home, there’s actually good news. Among the top ten most expensive home cost cities, rent prices have dropped significantly in the last year in eight of them.

This is most evident in the three largest Bay Area cities — San Jose, San Francisco and Oakland. Rent prices per square foot all dropped over 13 percent in the last year, while housing prices per square in these areas are listing up 6 percent, 17 percent and 2 percent, respectively.

“When rents and home prices per square foot diverge, this shows the relative strength of the for sale market compared to the rental market,” says Marr. “When renters become first-time homebuyers and leave the rental market, we’d expect home prices per square foot to increase and rents per square foot to decrease … which could mean either getting a better deal on a rental or buying an asset poised to appreciate.”

Among the 20 most populated cities in the nation, only New York City, Los Angeles, San Diego, San Francisco and Washington, D.C. rank among the 10 most expensive for both rent and home price per square foot. Fun fact — no other of the 20 largest cities appear on either list except San Jose and Seattle.

Conversely, the second-priciest city in which to buy a home Fremont, California, is just the 88th largest. Jersey City and Chula Vista, California, are the 75th and 71st most populous cities respectively, but carry the ranks of sixth and seventh as highest rent per square foot.

Price values in the Midwest: Cheap living in the Rust Belt and the Great Plains

While it’s expensive to buy and lease on the coasts, there is plenty of value away from the oceans. When breaking down the ten cheapest cities in which to rent versus those where home buying is most affordable — there’s a distinct geographic difference.

When looking at the nation’s 100 largest cities that have sufficient renting and home buying data, the cheapest home prices per square foot cluster in the Snow and Rust Belts, and the best values for rent sprinkle across the central Midwest.

The top cities in the U.S. for home price value are the Great Lakes cities of Detroit and Cleveland, with Indianapolis, Milwaukee and Buffalo among the top options. The cheapest apartments to rent are in the Great Plains cities of Tulsa, Oklahoma City and Lincoln.

Limited value in coastal cities

The city with the most affordable rent outside of the Midwest is Bakersfield, California, which ranks at 14th cheapest overall. On the East Coast, the lowest rent per square foot is Baltimore at 61st least expensive.

For home buyers, the trend is almost the same away from the interior U.S. The cheapest city for home prices per square foot in the East is also Baltimore, down at 26th least pricey. Surprisingly, the second-best home value along the Atlantic is No. 53 Philadelphia.

On the other coast though, you won’t find a city in the West until Spokane, Washington, down the list as the 37th most affordable.

The cities with the biggest differences in rent vs home price rank

Most of the cities ranked high for pricey rents also rank high for home prices and vice versa. If you break down the numbers, several cities offer a wide chasm between their rank of prices to lease an apartment and buy a home. These are the cities where it’s a great value to rent instead of buy or buy rather than rent.

Seven of the top 10 cities where it’s most significantly cheaper to rent than to buy are in the Great Plains and Great Lakes regions of the Midwest. Detroit, a city finding its way out of bankruptcy with rentals in high demand but few people buying new homes, is No. 1 with a whopping 68 point difference in ranking rent to home buying.

On the other hand among cities where the cost to buy a home is a much better value ranking than renting an apartment, seven of the top 10 are in the West.

In many places along the West Coast, including upper-middle-class residential California cities like Bakersfield and Fresno and suburbs like Glendale, Spokane and North Las Vegas, families are more interested in houses than apartments, cleaving a wedge between low rental prices and high home costs.

Most of the best values for housing overall fall in the Central South. By far, Memphis has the best overall value, ranked fifth cheapest for rents and ninth cheapest for home prices. Tulsa, Oklahoma City and El Paso follow closely.

Houston holds the best value rankings for cities in the top 10 by population as the 31st cheapest rent and 34th lowest home prices. Right behind are Phoenix, San Antonio and Dallas.

Price per square foot in the most populated cities

Only renters and buyers know where they want to spend the next chapter of their lives or the value of staying put. With all of the available data below from the top 100 cities, they can draw their own conclusions.

Methodology

For each of the 100 largest cities in the U.S. with rental inventory on Rent., we explored the average rent price per square foot for a two-bedroom apartment and the median home listing price per square foot as of April 2021.

Two-bedroom rent prices are based on a rolling weighted average from Apartment Guide and Rent.’s multifamily rental property inventory in April 2021. Our team uses a weighted average formula that more accurately represents price availability for each unit type and reduces the influence of seasonality on rent prices in specific markets.

Housing data is based on April 2021 median listing price per square foot from Redfin.

The rent and housing 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.