Last week, an infographic from the Tax Foundation went viral
relative value of $100 in each state
. As I wrote then: "The above data doesn't tell the full story.
... A large portion of the differences in price parity is based
on the cost of rent or the comparable mortgage payments."
I calculated the relative value of housing dollars using data
on regional price parities from the Bureau of Economic Analysis.
The $100 level is based on the national average; each state's
data is then relative to that level. When you include everything,
the relative value of $100 in each state
varied from $84.60 to $114.74.
Now, I've created my own infographic to show the relative
value of housing dollars in each state compared with the national
average. Read on to learn more.
By state, in terms of housing, your dollars go the furthest in
Mississippi, where the relative value of $100 is $161.03. Your
dollars get you the least in Hawaii, with a relative value of
$62.89. That means the same amount of money for housing is worth
150% more in Mississippi than in Hawaii. Even in less extreme
cases, the differences can be high.
Take Massachusetts and Rhode Island, for example. The relative
value of housing in Massachusetts is $82.37. But in neighboring
Rhode Island, your housing dollars are worth $98.43 compared with
the national average. In other words, housing-related money is
worth 20% more in Rhode Island than in Massachusetts.
There are some good reasons for the disparity. Housing prices
are generally higher in areas where more people want to live.
That's why coastal states usually have higher prices than inland
states. Second, housing prices are generally higher in areas with
higher average incomes. New York City and Silicon Valley have
some of the highest housing prices in the U.S., as that's where
many of the highest-paying jobs in the U.S. are.
Another big reason for the vast disparities in housing prices
is that the areas with the most demand and highest prices
typically have some sort of supply constraints on housing that
keep prices high. In general, coastal areas are known for having
strict zoning requirements that make it more expensive or
impossible for developers to build there. For example, Manhattan
has limited housing supply, given that it's an island and has
rent control, which lowers the incentive for developers to
upgrade old buildings. Washington, D.C. has limited housing
supply because of the strict height restriction on buildings in
the city, while San Francisco has limited housing supply for a
multitude of reasons, including height restrictions, rent
control, and many other factors.
Compared with the Northeast, most states have lower costs of
living. The disparities in the cost of housing are one of the
main reasons there has been a migration from high-cost states
such as New York and California to the South, where your dollars
go much further. Combine that with better weather and
low to no income taxes
, and you can see why many retirees decide to move south.
cost of living by state
is important to consider when you're thinking of moving to a new
state. The grass isn't always greener on the other side of the
state line. While a salary in a different state may be higher
than your current salary, the cost of living can translate to
dramatic differences in how far that salary goes, as well as your
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The Real Value of Housing Money in Each State
originally appeared on Fool.com.
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