What Is ‘Cost of Living’? A Resource Guide for Homebuyers
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Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
If you’re planning a move to a new location, it’s likely you’re calculating costs — everything from the price of a home and groceries to what your new electric and water bills might look like. You’ve probably heard the phrase “cost of living” thousands of times, but as you review your finances, you may be asking, “What is cost of living?”
It’s more than just a figure; it’s an ever-changing factor that influences your standard of living, especially if you’re planning to sell your current home and purchase a new one in a new city.
In this post, we explore the concept of “cost of living,” provide Cost of Living Index (CLI) links you can use, and share a handy set of additional tools to measure cost of living expenses in other places before you make your move.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
What does ‘cost of living’ mean?
The phrase “cost of living” encompasses the financial requirements needed to maintain a specific lifestyle in a particular area. As defined by Statista, a leading market data provider, it is “the monetary cost of goods and services necessary to maintaining a certain standard of living.” This cost varies significantly based on location and lifestyle choices.
At its core, the cost to live somewhere typically includes the expenses you incur for:
- Housing (rent/mortgage)
- Energy (utilities)
- Food (groceries)
- Transportation (vehicles or transit systems)
- Healthcare (doctors, hospitals, etc.)
However, it extends beyond these basics to cover other aspects, such as:
- Clothing
- Education
- Childcare
- Entertainment
All these elements combined paint a comprehensive picture of the cost associated with a particular way of living.
Your standard of living is largely influenced by your salary or income, your debts, and how these compare to the costs of basic needs in the region where you live — or where you want to live. Let’s look at some ways you can compare the cost of living you have now with what you might experience in a new location.
What is a cost of living index (CLI)?
A cost of living index (CLI) monitors how much these basic expenses go up or down over time in different cities or regions. They provide a way for you to compare the price of maintaining a certain standard of living.
The CLI is calculated by assessing the price of essential goods and services such as housing, food, healthcare, and transportation in different areas.
An index is typically standardized, with a base city or region being assigned a baseline index value (often set at 100). Other cities or regions are then compared against this benchmark. For example, an area with a CLI of 120 would signify that living there is 20% more expensive than the base location, while an index of 80 indicates it’s 20% less expensive.
Least and most expensive states: According to Statista’s most recent nationwide cost of living index calculations, the least expensive states to live in the U.S. are Mississippi, Oklahoma, and Kansas. The state of Mississippi — the least expensive state — holds a CLI score of 84.5, which is well below the national benchmark of 100. The most expensive places to live are listed as Hawaii, the District of Columbia, and Massachusetts, which have CLI scores of 184, 152.2, and 149.7, respectively. (Final 2023 data has not yet been complied.)
A cost of living index will often break down and score each basic expense by category. For example, here are separated CLI scores for Mississippi:
- Groceries: 92.2
- Housing: 66.3
- Utilities: 90.4
- Transportation: 86.7
- Health: 94.7
- Miscellaneous: 90.9
Checking a cost of living index can give you a preliminary look at how far your income will stretch in a new city or state, and helps in budgeting and planning for your move. This is particularly beneficial if you are selling and/or buying a home, giving you a clearer picture of the economic landscape you’ll face in a new place.
Examples of cost of living indexes
A number of organizations track the costs of housing, energy, groceries, transportation, and healthcare to create “cost of living indexes.” Some examples include:
- Statista cost of living index: As noted above, the data website Statista provides an annual composite cost of living index for each state in the U.S. You can also find wage and salary estimates and other location-specific data. Statista provides free access to many basic statistics. With a paid account, you can access more detailed fee-based premium statistics.
- ACCRA cost of living index: The ACCRA COLI is maintained by the Council for Community and Economic Research to provide “accurate and reliable” cost of living comparisons between your area and any other participating cities across the U.S. This is a paid service starting at $7.95, with additional comparisons from the same starting place charged at $4.95.
- World Population Review CLI page: This free website provides a handy search-by-state tool at the bottom of its Cost of Living Index page. You can even set minimum and maximum cost parameters by category (groceries, healthcare, housing, transportation, utilities) to filter the results. This site also provides population and demographic information.
- Numbeo cost of living index: The crowd-sourced online database website Numbeo generates a cost of living index that can be broken out by year, city, and country for those areas where contributors have provided data. The website, which is free for personal use, also provides quality-of-life data, such as housing indicators, perceived crime rates, healthcare quality, transportation quality, and other statistics, including the cost of a beer at a restaurant.
Moving out of the country?
Because it solicits worldwide cost of living data by country, Numbeo is also a popular resource for those planning an international move.
You can also gain international insights from the Organization for Economic Cooperation and Development (OECD), an economic growth forum made up of governments of 37 democracies with market-based economies.
Additional tools to measure cost of living expenses
The United States government does not maintain or report an official cost of living index, but some agencies track factors that impact the overall cost of living.
- Consumer Price Index (CPI): The U.S. Bureau of Labor Statistics maintains the nation’s Consumer Price Index (CPI). The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. According to the bureau, “CPI is widely used as a cost-of-living index (COLI), which answers the hypothetical question concerning what expenditure level is needed to achieve a standard of living attained in a base period at current market prices.”
CPI is not a traditional cost of living index
The government’s Consumer Price Index is not considered a full-function cost of living index. It does not compare the costs of living in a given city or show specific changes in those expenses over time. However, it can provide average price data for select utility, automotive fuel, and food items to help you determine what might be required to maintain the standard of living you desire.
- Cost-of-Living Adjustment (COLA): Another tool that can be helpful as you make decisions about where to live and your standard of living is the Social Security Administration’s annual “cost of living adjustment,” known as COLA. To keep up with inflation, the government makes adjustments to Social Security benefits each year. For 2024, Social Security and Supplemental Security Income (SSI) benefits for more than 71 million Americans went up by 3.2%.
- BEA Regional Price Parities tool: The U.S. Bureau of Economic Analysis (BEA) provides an annual report of regional price parities (RPPs) that measure the differences in price levels across states and metropolitan areas. This data is expressed as a percentage of the overall national price level. For example,
real personal consumption expenditures (PCE) by state increased in 42 states last year. Real personal income declined in 45 states.
Depending on the area you are moving to, you can often find area-specific cost of living data on city, state, county, or regional websites.
How Much Is Your Home Worth Now?
Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.
What is a cost of living calculator?
A cost of living calculator can provide you with an initial snapshot of how much money you might need to maintain your current standard of living in a different community. These online tools use cost estimates to provide a comparison based on income and regional costs for housing, transportation, food, healthcare, and other basic necessities in the two locations you select. They can be a handy resource for preliminary research before making a move.
Examples of popular online cost of living calculators include:
How does your dollar compare to the past?
You also might find it interesting to see how much your dollar is worth today compared to past years. The U.S. Bureau of Labor Statistics offers a cost of living calculator that lets you enter a year and a dollar amount. For example, $1,000 today would be the equivalent of 31,332 in 1913.
Additional wage and budgeting resources
- Living Wage Calculator: The Massachusetts Institute of Technology (MIT) has created a Living Wage Calculator designed to “help individuals, communities, employers, and others estimate the local wage rate that a full-time worker requires to cover the costs of their family’s basic needs where they live.”
- Family Budget Calculator: The Economic Policy Institute (EPI) provides a Family Budget Calculator that “measures the income a family needs in order to attain a modest yet adequate standard of living.” The tool presents estimated budgets based on community-specific costs for 10 family types in all counties and metro areas in the U.S.
Resources for homebuyers
- Home Affordability Calculator: Understand the costs associated with buying a home and find out how much home you can afford before you start looking at homes for sale or planning a move.
- Down Payment Calculator: Estimate how much you might need to put down on a home and learn more about the loan options that work best for you.
- Closing Costs Calculator: Find out how much cash you’ll need for closing costs on a house, including estimated lender and third-party fees.
- Buy Before You Sell: Learn about HomeLight’s Buy Before You Sell program that lets you move into your new home now and sell your current house with peace of mind and on your timeline. Learn more from the short video below.
Resources for home sellers
- Home Value Estimator: Get a preliminary estimate of what your current home is worth, along with options to help you get the best price when you’re ready to sell.
- Best Time to Sell Calculator: Use this calculator that incorporates nationwide real estate transaction data to help time your move.
- Agent Commissions Calculator: Learn how much you might pay in real estate agent commissions when selling a house in your current market.
- Net Proceeds Calculator: Get a ballpark idea of the net proceeds you could earn from the sale of your existing home.
You can find handy online tools that help you estimate the cost of paying for a mover and help you find a trusted mover. Examples include:
- Move.com Moving Cost Calculator
- Consumer Affairs ‘Find a Mover’ tool
- U-HAUL ‘Moving Help Cost’ resource page
Partner with a professional to find your new home
As you plan your next move, HomeLight can connect you with a top-performing, trusted real estate agent in your current city or in the city where you’d like to live. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
For the best of both worlds — coming and going — ask your agent about HomeLight’s Buy Before You Sell program to help take the uncertainty out of your next home purchase.
Header Image Source: (bilanol.i.ua/ Depositphotos)
- "Real Personal Consumption Expenditures by State and Real Personal Income by State and Metropolitan Area, 2022", The U.S. Bureau of Economic Analysis (December 2023)
- "Composite cost of living index in the different states of the United States as of 2022", Statista (June 2023)
- "U.S. cost of living - statistics & facts", Statista (December 2023)
