Rent or buy?

Buying a home may offer stability, tax benefits and a chance to build wealth over time. But if you are considering monthly costs, renting is cheaper than monthly mortgage payments in 45 out of the 50 largest metropolitan areas in the United States, according to a new analysis by Clever, a real estate company.

Nationally, growth in home prices has outpaced increases in rent by nearly 70% from 2016 to 2023, with the median home price rising to $371,000 from $217,000 over that period.

During that same stretch, home prices in the 50 largest metro areas climbed 73%, while rent prices rose 45%. In 2023, renters saved an average of $872 a month compared with those making mortgage payments in the 50 largest metros, according to the report.

The study analyzed the price-to-rent ratio, which is calculated by dividing the median home price by the median annual rent and compares the cost of buying a home to the cost of renting expressed as a ratio. A ratio of 15 or lower generally means it's better to buy, while 21 or higher means it's better to rent.

Three California metros with very expensive homes – San Jose, San Francisco and Los Angeles – had the largest average gap between renting and buying in 2023.

In San Jose, the median rent is $3,181 while the monthly mortgage payment with a 6.8% interest rate is $9,372, a difference of $6,191. In Los Angeles, the difference is $2,802 and in San Francisco, it is $4,089.

Rent: Single family homes for rent are getting more expensive. Here's where prices are going up

Housing wealth: Why it pays to buy a house: Homeowners became 40 times wealthier than renters in the past decade

Are rents outpacing home price growth? 

In every one of the 50 markets, home price growth outstripped rent growth from January 2016 to January 2023. Nationally, home price growth has outpaced rent price growth by nearly 70% from 2016 to 2023.

However,from January 2022 to January 2023, rent growth was faster than housing price growth in half of the cities, according to the study. Those cities include San Francisco and New Orleans.

Florida is home to the four cities – Miami, Jacksonville, Orlando, and Tampa – with the highest increases in home prices.

10 best cities for renting vs buying a home

Ten cities in the study have price-to-rent ratios of 21 or above, meaning it’s better to rent. San Jose has the highest price-to-rent ratio in the study at 38. Due to its high home prices – typically $1,431,676 – it’s easier to rent.

However, for renters in San Jose, rent prices are also extremely high. The typical monthly rent in the Bay Area is $3,181 – nearly three times more than Pittsburgh’s typical monthly rent ($1,214), the lowest in the study.

A ratio between 15 and 21 may indicate that the decision to buy or rent depends more on individual circumstances, such as long-term goals and specific housing needs that aren’t easily addressed by a simple cost analysis.Of the cities with a price-to-rent ratio of 21 or higher, Salt Lake City has the lowest annual rent costs. In Salt Lake City, renters can expect to pay just $26,079 a year, nearly $17,500 less than they would in the most expensive city, San Jose.

Where is it cheaper to buy than rent?

In New Orleans, Pittsburgh, Chicago, Cleveland, and Memphis, Tennessee, it’s cheaper month over month to pay the typical mortgage payment than rent. New Orleans has the most savings, with the typical monthly mortgage payment costing $107 less than the typical rent. In Pittsburgh, it will cost you $100 less per month to buy a home.

The top 18 cities for buying all have a price-to-rent ratio of 15 or lower, a good sign that renters are better off buying a home than continuing to rent long-term.

Pittsburgh, while tied with other cities such as New Orleans, Chicago, and Cleveland for the lowest price-to-rent ratio of 12, is the best city for buyers because it also has the lowest ($188,419) home prices of all cities, according to the study. New York City has the highest home prices at $559,117. But given that rent is typically $3,068 a month, residents are better off springing for a mortgage than paying rent to a landlord.Half of the top 18 cities for owning homes are located in the South: New Orleans, Memphis, Miami, Oklahoma City, Tampa, Florida, and Birmingham, Alabama.

Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY.  You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.

This article originally appeared on USA TODAY: Rent vs. buy: When house searching, calculations vary based on locale