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At the end of 2022, due to rising mortgage rates and home prices, in many markets it was less expensive for households to rent than purchase a median-priced home. According to the U.S. News & World Report, the share of monthly per-capita incomes paid by tenants to landlords was 36% at year-end compared with 37% for homeowners.

The ratios paid by households vary by geographic location, with homeowners in some markets paying up to 67% for principal and interest and renters paying up to 58% of their monthly income for housing costs in the most overvalued markets. Conversely, in the most undervalued markets, homeowners are paying below 35% median per-capita incomes for mortgage payments. According to an analysis by U.S. News & World Report, the majority of the most undervalued markets in the country, with low payment-to-income ratios, are located in the Rust Belt region of the country.

The analysis finds that Detroit, Cleveland, St. Louis, Philadelphia, and Cincinnati are the most undervalued markets to purchase a home. In Detroit, the median payment-to-income ratio, 17.4%, is less than half the national average of 36.6%. Payment-to-income ratios in each of the top five most undervalued markets are all below 24%. U.S. News & World Report says the majority of undervalued markets are located in the Midwest, East Coast, and South. Chicago, Indianapolis, Baltimore, Houston, Minneapolis, Richmond, Atlanta, Jacksonville, and Dallas all have median payment-to-income ratios below the national average of 36.6%.

U.S. News & World Report also identified the markets with the largest difference between the cost of owning versus renting. In the most undervalued markets, the cost to own is 5% to 10% lower than the cost of renting. The five metros with the largest difference between the average cost of renting and owning are Detroit (10.3% difference), Philadelphia (6.4% difference), Cleveland (6.3% difference), Chicago (5.0% difference), and Miami (4.6% difference).

U.S. News & World Report generated rankings from data collected for the U.S. News Housing Market Index.