How Cost of Living Affects Your Home Buying Power
People don’t say “location, location, location” for nothing: The price of the same four-bedroom home can vary dramatically between different cities and states, or even within the same area. Likewise, the cost of living—what you can expect to pay to sustain a standard of living—varies from region to region.
Cost of living factors in the price of necessities in a particular location, like food, utilities, housing, services, transportation and taxes. If you’re looking to buy a home in a new location, comparing this number with the national average, and with your current location, can be a useful way to determine where you can find more bang for your buck.
Keep in mind that cost of living doesn’t necessarily indicate quality of living—a more expensive location isn’t necessarily a better choice for you. Likewise, the amount you’ll save in a less expensive location might necessitate a change in lifestyle. You may be able to afford a bigger house in a different state, but it might require a longer commute—or the added cost of a car if you don’t already have one. Also worth considering: do jobs in the area offer pay that’s comparable to your current job? What can you expect to pay in income tax, sales tax and insurance premiums?
On the other hand, there are certain factors that simply don’t have a price tag. It might be more expensive to live by the lake, but being close to nature and recreation might have more value to you than having a lot of space. If you have children, it might make more sense to buy a smaller home in a higher cost-of-living area with a more desirable school district. Your new home, above all, is an investment in your future. So it really comes down to what matters most to you.