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Should You Rent or Buy

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San Francisco Homes

An apartment for rent in a San Francisco neighborhood.

B. Koh

Over the past couple of years, prompted by drooping housing prices in the city, many people have chosen to buy San Francisco homes. Now that prices seem to have stabilized and are even inching up, if you’re still renting, have you missed out on a great San Francisco real estate deal? Nope, says a 2010 Rent.com study.

In fact, the best US city in which to rent homes is San Francisco, according to the analysis that Rent.com produced for CBS Money Watch.

That’s based on the market’s “rent ratio”: the purchase price of a home, divided by the annual rent of a home of similar size and amenities, in the same neighborhood. In a city where it costs $500,000 to buy a two-bedroom condo and $24,000 a year to rent it, the rent ratio is 21.

“The higher the ratio, the higher a housing price spike is needed in future years to justify the purchase price,” says Rent.com’s CEO. The magic tipping point is 15; if the rent ratio is 15 or lower, then financially it’s wiser to buy than rent.

San Francisco’s rent ratio is 37—which puts our beloved city at the top of the best-cities-to-rent ranking. Rent.com notes that owning a home in San Francisco can cost twice as much as renting. And that’s probably not even factoring in San Francisco’s rent control laws, which are definitely renter-friendly.

After San Francisco, the next best rental cities are New York, Honolulu, Tucson and LA.

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