It's an oft-heard joke that millennials would rather spend money on avocado toast than buy a home, but the reality is much more complicated.
In decades past, owning a home was a cornerstone of personal achievement, but increasingly, this dream is falling out of favor. As of 2022, 77.8% of the Silent Generation and 76.8% of baby boomers owned homes, in contrast to just 51.5% of millennials. In the same year, almost 25% of millennials stated they would "always rent" and never purchase a house.
There are a variety of reasons. Millennials came into adulthood right around the time the real estate market collapsed in the late 2000s. They are also facing record-breaking student loan debt, inflated mortgage rates, and the fallout from the COVID-19 pandemic, which raised housing prices as more people shifted to work-from-home setups.
While buying a home may once have been a given, members of all generations are now seriously weighing when it is best to rent. Stacker analyzed home and rent prices from Zillow to see where it makes more sense to buy than rent. This analysis measured the 500 largest cities by population.
The price-to-rent ratio was calculated by dividing the 2023 median home price in that city by the annualized rent. The price-to-rent ratio is an industry metric used to measure whether it is cheaper to buy or rent, or whether the housing market is overvalued in that location. It does not take into account affordability.
In the 500 largest cities in the U.S., the average price-to-rent ratio was 18.58. Most of the cities on the list are in the Midwest and South, where home prices are lower than on the coasts.
Buying a home is a big financial decision with many one-time upfront closing costs, including down payments and fees. This analysis does not consider those costs, nor the monthly mortgage payment, which can vary depending on the type of loan secured, interest rates, or credit scores.
Read on to find out where it's worth it to splurge on a down payment and where you'd be better off keeping your savings intact.