The prices of goods and services — whether they are essential such as housing, food, and medical care or luxury items such as tobacco and sports equipment — vary widely across the nation and within states.
Based on recently released price level data from the Bureau of Economic Analysis (BEA), 24/7 Wall St. reviewed the most expensive metropolitan areas in each state. Across all metro areas, Urban Honolulu, Hawaii has the highest cost of living, while Danville, Illinois is the least expensive place to live in the country.
Since every state must have a most expensive area, the city in which price levels are highest is not necessarily especially expensive compared to the nation or areas in other states. Goods and services in the most expensive city in 30 states actually cost less than they do on average nationwide. These cities are usually in states that have low costs of living themselves. For example, Jackson is the most expensive city in Mississippi, which itself is the least expensive state in the country. And prices in Jackson are 8.5% cheaper compared to national prices.
According to Eric B. Figueroa, an expert on purchasing power parity at the BEA, price levels may vary across areas for a host of reasons. The amount of land available in any given area is one factor. Rent and other living expenses are part of the regional price parity calculation, and rents tend to be higher in more-densely populated metropolitan areas.
While the exact relationship between wages and living costs is not identified by the BEA, Figueroa said, “Goods and services may have higher [prices] in areas that have higher wages relative to areas with lower wages.” The median household income in the most expensive city in 33 of the 50 states exceeded the national median of $52,250.
To identify the most expensive city in each state, 24/7 Wall St. reviewed the highest regional price parities among each state’s metro areas from the BEA. RPPs are expressed as an index of the national average price level (100) for goods and services in 2012, the most recent period available. We also reviewed socioeconomic data, including median household income, per capita income, educational attainment rates, poverty rates, and homeownership rates from the U.S. Census Bureau’s American Community Survey (ACS). Annual unemployment rates for 2014 came from the Bureau of Labor Statistics, (BLS).
Some metropolitan statistical areas span multiple states. For example, the New York-Newark-Jersey City metro area includes cities in New York as well as New Jersey. Each metro area has one principal city designated by the Office of Management and Budget. New York is the principal city of the New York-Newark-Jersey City metro area. To avoid treating a city as the most expensive place in two states, we assigned each metro area to the state in which its principal city is located. Because the New York-Newark-Jersey City metro area’s principal city was in New York, the metro area was treated as a New York metro area and was excluded from consideration for New Jersey. This means that many NJ cities that are in the metro were excluded from consideration for that state.
These are the most expensive cities in each state.