Is it time to relocate to a more affordable area? What to consider

Erik J. Martin, Bankrate, 24 June 2022

The number of Americans who moved in 2021 increased 20 percent, North American Van Lines reports, and many chose to relocate to a different out-of-state market for a cheaper cost of living. Relocating due to affordability concerns can make a lot of financial sense, especially with inflation weighing on wallets, but there are many considerations to give thought to before packing up and moving. Here’s what to keep in mind.

Lowest and highest cost of living states

The cost of living in each area is the amount it costs to cover necessary expenses, including housing, food, health care, clothing, taxes, education, transportation, and entertainment. The cost of living is closely related to the earnings in a specific location and is often used to compare different housing markets.

Many states boast a lower cost of living than others. According to the Missouri Economic Research and Information Center (MERIC) index, here are the states with the lowest and highest costs of living, based on 2021 data:

1. Mississippi
2. Kansas
3. Alabama
4. Oklahoma
5. Georgia
6. Tennessee
7. Missouri
8. Iowa
9. West Virginia
10. Indiana

Highest cost of living states

1. Hawaii
2. Washington, D.C.
3. New York
4. California
5. Massachusetts
6. Oregon
7. Alaska
8. Maryland
9. Connecticut
10. Rhode Island

It can be instructive to also zoom in on cities with higher relocation activity. According to moving and storage company Pods, the metro areas that have had the highest growth in residents from January 2021 through March 2022 are:

1. Sarasota, Florida
2. Dallas-Fort Worth, Texas
3. Nashville, Tennessee
4. Tampa Bay, Florida
5. Ocala, Florida
6. Myrtle Beach, South Carolina/Wilmington, North Carolina
7. Knoxville, Tennessee
8. Atlanta, Georgia
9. Orlando, Florida
10. Phoenix, Arizona

Other moving companies have seen similar trends in Dallas, Orlando, and Phoenix, especially.

Common reasons for relocating

The most important factors when deciding why and where to move, according to Ryan Carrigan, founder of moveBuddha, a mover price comparison tool, are:

• Quality of life
• Cost of living
• Family/friends

“With working from home and virtual employment becoming more of the norm, workers are seeking cities and states with lower costs of living or that offer a better quality of life,” says Ralph DiBugnara, CEO of Home Qualified. “In many cases, there is no need to commute anymore, so homebuyers want to live where they can have a better life.”

Pros and cons of relocating

Moving is one of life’s biggest stressors, especially if it’s a long-distance relocation, and it presents both advantages and disadvantages.

“On the plus side, you may find more affordable housing and enjoy a better quality of life,” says Carrigan. “The taxes you pay may be lower, too.”

However, a state or city that appears less expensive doesn’t automatically mean you’ll save money living there or feel satisfied after relocating.

“Cheaper cities love to boast their affordable housing, but they are often silent on the fact that they have undesirable wages, leaving large segments of their population struggling to pay for adequate shelter,” says Herndon Davis, a mortgage loan officer in Fort Lauderdale, Florida. “What you don’t want to do is purchase a home in a cheaper area but not find employment to cover your expenses. Relocating is best for those who can work remotely for a company while relatively maintaining their current high income level.”

Still, a new area might boast better public schools, lower crime rates, and more community amenities. Plus, moving offers the opportunity to make new friends and establish fresh roots, particularly if you’ve stayed put in one place for too long.

“On the downside, relocating may mean leaving friends and family behind,” says Carrigan. “You could face a salary cut if your new area’s median wages suffer, and moving costs and relocation expenses may be higher than you anticipate.”

What to consider before relocating

Life goals and needs – For example, will you be able to grow or accommodate your family and its future needs in your next chosen location? Will moving help or hinder your career and advancement prospects?

Cost of living – What can you expect to pay for your next home or rental? How much will it cost to buy a home and move, and can you expect to stay put long enough to recoup these costs? How much will your homeowners insurance premium be? What do utilities, groceries, and other everyday expenses typically cost?

Economic stability – Look for key measures of prosperity, says Doug McKnight, president, and chief investment officer of RREAF Holdings, a commercial real estate firm. “Does the area show population growth, wage growth, and plenty of job opportunities?” says McKnight. “What corporations are relocating to the area? These are indicators of a market that is pro-growth and [a local] government that is pro-business.”

Neighborhood – What are the crime statistics for the area you’re considering? Does the community offer convenient or highly rated parks, park district facilities, health care facilities, shops, stores, restaurants, and other hotspots?

Taxes – What can you expect to pay in property taxes, state taxes, sales tax, and other taxes?

Schools – If you have (or plan to have children), what are their educational options? For local public schools, performance rankings, teacher-to-student ratios, and average test scores can be reliable indicators of the quality of the district.

Commute – If you’re commuting to work, will you live close enough to your place of employment to take advantage of public transit? What about walkability? If you need to drive, how long is the commute?

If you’re seriously considering relocating due to the cost of living, start with a cost of living calculator, which can help you explore what you can expect to pay for everyday expenses in a given city.

Source: https://www.bankrate.com/real-estate/relocating-for-lower-cost-of-living/