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- Elevated mortgage rates and limited housing supply are keeping rent at record highs.
- Hopeful homebuyers can use price-to-rent ratios to see where the best deals are.
- Here are 34 real estate markets where homes are relatively affordable and likely to gain value.
Although rent growth has steadily cooled since last summer, monthly payments to landlords are still at all-time highs. Decade-high mortgage rates and a housing market shortage have made homebuying complicated for everyone, and impossible for many.
But landing a dream home doesn't have to be a nightmare.
Prospective property owners can narrow their search to markets where homes are reasonably priced relative to rent and are, therefore, likely to appreciate going forward. That way, buyers can get an attractive deal and build equity instead of getting caught in a housing market bubble.
To find these housing markets, a trio of professors across Florida Atlantic University and Florida International University aim to empower house-hunters with a tool called the price-to-rent ratio. The team determines how much homes in a market cost relative to a year's worth of rent and compares that figure to averages dating back to March 2015 to determine whether a price-to-rent ratio is historically high or low.
Lower price-to-rent ratios imply that buying property is relatively affordable, while also indicating that prices are stable and will likely appreciate in the future, according to the researchers.
Conversely, high price-to-rent ratios suggest that a housing market is overvalued and could be subject to unstable or declining prices. Renting is a better deal in those cities, allowing would-be buyers to retain flexibility as they wait for home prices to decline.
Many of the markets with lofty price-to-rent ratios are on the West Coast, the professors noted in a mid-August press release about their latest findings. Meanwhile, many East Coast cities had rather low price-to-rent ratios, which hints that they'll have stable, steadily rising home prices.
34 top markets to buy homes in
But while the researchers regularly share their findings on nationwide price-to-rent ratios, the results are sorted by the gap between the prior month's price-to-rent ratio and its average since 2015, which makes it difficult to determine which cities are the best bets for buyers or renters.
To help hopeful homeowners get a leg up in this competitive market, Florida Atlantic University's Ken Johnson, the real estate economist who heads up the study, shared data dating back to 2015 exclusively with Insider.
Johnson and his counterparts, Eli Beracha and William Hardin of Florida International University, have found that the key level to watch with price-to-rent ratios is 15. Any ratio under that mark indicates that prices are stable and likely to rise, while ratios above 20 may be subject to declines, though homeowners in those markets shouldn't expect property values to plummet overnight.
"In general, once prices start to fall, they should do so until the local current price-to-rent ratio roughly equals the local historic average price-to-rent ratio," Beracha said in the press release.
Although real estate markets with low price-to-rent ratios aren't always highly affordable — depending on cost of living and incomes in the area — they do tend to favor home ownership.
An analysis of the researchers' data found that of the 100 largest US metro areas by population, 34 have a price-to-rent ratio below 15, meaning that they're likely to have stable, growing prices.
Below are the 34 such markets, along with the price-to-rent ratio as of July 31, the average price-to-rent ratio since March 2015, and the current premium to that long-term average. Only one city — New Orleans, Louisiana — has a discounted price-to-rent ratio, meaning that the city is especially appealing for buyers right now.
1. El Paso, Texas
Price-to-rent ratio: 10.8x
Average price-to-rent ratio: 10.1x
Premium to long-term average: 7.3%
Source: Florida Atlantic University
2. Jackson, Mississippi
Price-to-rent ratio: 11.7x
Average price-to-rent ratio: 10.9x
Premium to long-term average: 7.1%
Source: Florida Atlantic University
3. Syracuse, New York
Price-to-rent ratio: 12x
Average price-to-rent ratio: 11.5x
Premium to long-term average: 5%
Source: Florida Atlantic University
4. New Orleans, Louisiana
Price-to-rent ratio: 12.2x
Average price-to-rent ratio: 12.4x
Premium to long-term average: -1.4%
Source: Florida Atlantic University
5. Pittsburgh, Pennsylvania
Price-to-rent ratio: 12.3x
Average price-to-rent ratio: 11.6x
Premium to long-term average: 6.5%
Source: Florida Atlantic University
6. McAllen, Texas
Price-to-rent ratio: 12.3x
Average price-to-rent ratio: 10.2x
Premium to long-term average: 21.1%
Source: Florida Atlantic University
7. Toledo, Ohio
Price-to-rent ratio: 12.4x
Average price-to-rent ratio: 12.1x
Premium to long-term average: 3%
Source: Florida Atlantic University
8. Chicago, Illinois
Price-to-rent ratio: 12.6x
Average price-to-rent ratio: 11.9x
Premium to long-term average: 5.9%
Source: Florida Atlantic University
9. Winston, North Carolina
Price-to-rent ratio: 12.7x
Average price-to-rent ratio: 11.3x
Premium to long-term average: 12.6%
Source: Florida Atlantic University
10. Memphis, Tennessee
Price-to-rent ratio: 12.9x
Average price-to-rent ratio: 11.6x
Premium to long-term average: 10.8%
Source: Florida Atlantic University
11. Augusta, Georgia
Price-to-rent ratio: 13x
Average price-to-rent ratio: 12x
Premium to long-term average: 8.3%
Source: Florida Atlantic University
12. Cleveland, Ohio
Price-to-rent ratio: 13x
Average price-to-rent ratio: 12.1x
Premium to long-term average: 7.4%
Source: Florida Atlantic University
13. Columbia, South Carolina
Price-to-rent ratio: 13x
Average price-to-rent ratio: 12.1x
Premium to long-term average: 7.7%
Source: Florida Atlantic University
14. Greensboro, North Carolina
Price-to-rent ratio: 13.2x
Average price-to-rent ratio: 12.2x
Premium to long-term average: 8.5%
Source: Florida Atlantic University
15. Lakeland, Florida
Price-to-rent ratio: 13.5x
Average price-to-rent ratio: 12.3x
Premium to long-term average: 9.8%
Source: Florida Atlantic University
16. Rochester, New York
Price-to-rent ratio: 13.5x
Average price-to-rent ratio: 12.6x
Premium to long-term average: 7.5%
Source: Florida Atlantic University
17. Miami, Florida
Price-to-rent ratio: 13.6x
Average price-to-rent ratio: 12.5x
Premium to long-term average: 8.3%
Source: Florida Atlantic University
18. Scranton, Pennsylvania
Price-to-rent ratio: 13.7x
Average price-to-rent ratio: 13x
Premium to long-term average: 5.1%
Source: Florida Atlantic University
19. Baton Rouge, Louisiana
Price-to-rent ratio: 13.7x
Average price-to-rent ratio: 13.1x
Premium to long-term average: 4.8%
Source: Florida Atlantic University
20. Oklahoma City, Oklahoma
Price-to-rent ratio: 13.9x
Average price-to-rent ratio: 12.3x
Premium to long-term average: 12.3%
Source: Florida Atlantic University
21. Tulsa, Oklahoma
Price-to-rent ratio: 13.9x
Average price-to-rent ratio: 12.5x
Premium to long-term average: 11%
Source: Florida Atlantic University
22. Detroit, Michigan
Price-to-rent ratio: 14.3x
Average price-to-rent ratio: 13.1x
Premium to long-term average: 8.8%
Source: Florida Atlantic University
23. Tampa, Florida
Price-to-rent ratio: 14.3x
Average price-to-rent ratio: 13.2x
Premium to long-term average: 8.3%
Source: Florida Atlantic University
24. Birmingham, Alabama
Price-to-rent ratio: 14.5x
Average price-to-rent ratio: 12.9x
Premium to long-term average: 11.9%
Source: Florida Atlantic University
25. Knoxville, Tennessee
Price-to-rent ratio: 14.5x
Average price-to-rent ratio: 13.6x
Premium to long-term average: 7%
Source: Florida Atlantic University
26. New Haven, Connecticut
Price-to-rent ratio: 14.6x
Average price-to-rent ratio: 14.4x
Premium to long-term average: 1.4%
Source: Florida Atlantic University
27. Greenville, South Carolina
Price-to-rent ratio: 14.6x
Average price-to-rent ratio: 13x
Premium to long-term average: 12.4%
Source: Florida Atlantic University
28. Indianapolis, Indiana
Price-to-rent ratio: 14.7x
Average price-to-rent ratio: 13x
Premium to long-term average: 12.4%
Source: Florida Atlantic University
29. Little Rock, Arkansas
Price-to-rent ratio: 14.7x
Average price-to-rent ratio: 14.2x
Premium to long-term average: 3.1%
Source: Florida Atlantic University
30. Akron, Ohio
Price-to-rent ratio: 14.7x
Average price-to-rent ratio: 14.4x
Premium to long-term average: 1.9%
Source: Florida Atlantic University
31. Deltona, Florida
Price-to-rent ratio: 14.7x
Average price-to-rent ratio: 13.8x
Premium to long-term average: 6.3%
Source: Florida Atlantic University
32. Houston, Texas
Price-to-rent ratio: 14.9x
Average price-to-rent ratio: 13.2x
Premium to long-term average: 12.3%
Source: Florida Atlantic University
33. Allentown, Pennsylvania
Price-to-rent ratio: 14.9x
Average price-to-rent ratio: 14x
Premium to long-term average: 6.8%
Source: Florida Atlantic University
34. New York, New York
Price-to-rent ratio: 15x
Average price-to-rent ratio: 14.1x
Premium to long-term average: 6.5%
Source: Florida Atlantic University
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