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Why is the Average Cost of Living Lower in Some Cities

What You'll Learn: There Are Many Different Factors That Affect Your Cost of Living


If you’re considering making a move to a new city, you are probably looking at a number of factors when deciding on a location. Perhaps you want to move to be closer to family and friends. Maybe you’re looking for better weather for year-round recreation. You might choose based on nightlife or other social factors. At some point, however, you’ll need to spend some time crunching the numbers to determine the average cost of living in the cities you’re considering.

Cost of Living Index by City

There are many online resources to help you compare the cost of living in cities throughout the country. Some will provide an overall average price per year, while others will break their estimates down into categories for expenses related to a variety of lifestyle factors.

Remember that the numbers you’ll find represent a rough average for the cities you’re evaluating. There are many different factors that affect your cost of living in any given location. Your personality, expectations, occupation, and many other variables will change the numbers, so it’s important for you to think about what you want once you get to your new location.

Factors Affecting Cost of Living

The following factors will have a significant impact on your cost-of-living projections:

  • State and local taxation
  • Supply and demand for housing
  • Job opportunities and average income
  • Infrastructure and local amenities
  • Personal lifestyle preferences

While some markets are inherently more expensive than others, much will depend on your personal requirements. For example, imagine that you are a single person who plans to live in a small apartment or condominium in an affordable neighborhood with access to low-cost public transportation. Your cost of living will differ significantly from that of a person who’s moving with a large family, living in a spacious home in a fashionable neighborhood, sending the children to private schools, and commuting to a job in the city.

Developing Your Wishlist

In order to determine more precisely how much, it will cost you to live in the cities you’re comparing, it is a good idea for you to develop a personal wish list. This will give you guidance as you put together real numbers for your potential move.

Create a spreadsheet to compare the following average costs within the markets you’re considering:

  1. Housing costs
  2. Transportation costs
  3. Utility costs
  4. Variable costs (including social and lifestyle factors)
  5. Potential income in your chosen field

Compare Cost of Living Between Cities

Once you have put together your spreadsheet, you should be able to make a fair estimate of the projected cost of living in the different cities you’re considering. In order to develop a better estimate, don’t forget to include annual costs as well as regular recurring costs.

For example, a cheaper city on the other side of the country may not really be a bargain if you’re spending thousands of dollars each year traveling home for vacations and holidays with the family and friends you’re leaving behind.

Deciding Which City Is Right for You

Remember, deciding which city you should move to is more than just a financial calculation — it’s also about the overall quality of life in your new home. A more expensive city with a wide variety of opportunities for outdoor recreation, free museums and concerts, and other low-cost, desirable amenities may be a better deal than one that is cheaper but offers little to do. A cheaper city is no bargain if there are fewer job opportunities or the jobs pay significantly lower wages for the same work.

Preparing to Make Your Move

As you begin narrowing down your search for your next hometown, you’ll want to start looking at home prices in your target neighborhoods. In order to give yourself the best possible shot at securing the home of your dreams, it’s important for you to obtain a mortgage preapproval. This strengthens your offer and puts you in a better negotiating position with sellers in your new market. 

Remember, a favorable interest rate and an effective home search can make even expensive markets much more affordable.

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Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5


1Rates are updated daily at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.