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Cost of Living and Debt, State By State

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Cost of Living and Debt, State By State

It’s no coincidence that many states with a high cost of living are also home to people carrying the most debt. Residents of Alaska and Hawaii, which are notoriously expensive places to live, have the highest average consumer credit card debt of all states. Meanwhile, residents of Washington, D.C., and California carry the most mortgage debt on average.

A family can live comfortably in Georgia or Ohio on an income of $75,000 a year, but it might take $125,000 in places like Connecticut or New Jersey. For many Americans, income and cost of living are moving further apart.

Lagging incomes, rising costs and debt

The U.S. has seen a decline in affordability relative to income growth and that has been an important factor in rising debt levels. The cost of living across the U.S. has increased 29% since 2003, but median income has grown 26% in that time, according to NerdWallet’s latest study on household debt.

“While three percentage points doesn’t seem like a significant difference, this gap becomes much more significant for Americans who have acute or chronic health problems, or live in a city with a high cost of living, or are attending college,” says Sean McQuay, NerdWallet’s credit cards expert.

“It makes perfect sense then that debt has increased during this time,” he says. “The cost of living has simply outpaced income.”

NerdWallet’s analysis

NerdWallet examined Consumer Price Index data from the U.S. Bureau of Labor Statistics and household income data from the U.S. Census Bureau’s American Community Survey to compare changes in income and cost of living over the past decade in 27 of the largest U.S. metropolitan areas.

The map below shows the difference in growth of income and cost of living in each of the metro areas. The size of each bubble indicates the percentage of change in the area, with larger bubbles illustrating higher percentages. Green bubbles show where income has outpaced cost of living, while red highlights the places where incomes are lagging.

Click on a category to change the view.

Key highlights

Incomes haven’t kept pace. Increases in the cost of living top income growth in 17 of the nation’s largest 27 metro areas, meaning the dollar doesn’t stretch as far as it did 10 years ago for many Americans.

Houston is on the rise. Of the 27 major metropolitan areas, residents in Greater Houston have seen the biggest boost in income related to cost of living since 2005. The median household income increased nearly 33%, while the cost of living went up 21%. The region’s strong industry — based in energy, aerospace and manufacturing — has contributed to the growth of residents’ income.

Little growth in Atlanta. The Atlanta metro area ranks last in income growth among the nation’s larger cities. The median household income increased about 4% since 2005, much lower than the 16% increase in cost of living. Although Atlanta is one of the nation’s major business hubs, it also is home to growing income inequality.

Income and cost of living in 27 metro areas

Metropolitan areaChange in median household income, 2005-2015Change in cost of living, 2005-2015Percentage that income growth has outpaced cost of living (negative percentages show where cost of living tops income growth)
Houston-The Woodlands-Sugar Land, TX 32.71%20.69%12.02%
Seattle-Tacoma-Bellevue, WA 33.95%23.68%10.27%
Boston-Cambridge-Newton, MA, NH 24.88%18.47%6.40%
Dallas-Fort Worth-Arlington, TX 22.30%17.69%4.61%
San Francisco-Oakland-Fremont, CA 31.14%26.65%4.49%
Anchorage, AK 29.36%26.37%2.98%
Pittsburgh, PA 28.88%26.04%2.83%
Portland-Vancouver-Hillsboro, OR, WA 25.43%23.97%1.47%
Washington-Arlington-Alexandria, DC, VA, MD, WV 25.06%24.61%0.45%
Denver-Aurora-Lakewood, CO 24.76%24.72%0.05%
New York-Newark-Jersey City, NY, NJ, PA 22.09%22.22%-0.13%
Minneapolis-St. Paul-Bloomington, MN, WI 17.81%18.79%-0.97%
Philadelphia-Camden-Wilmington, PA, NJ, DE, MD 18.16%19.30%-1.14%
San Diego-Carlsbad, CA 19.78%21.19%-1.41%
St. Louis, MO, IL 15.77%17.37%-1.60%
Los Angeles-Long Beach-Anaheim, CA18.94%20.57%-1.63%
Chicago-Naperville-Elgin, IL, IN, WI 14.17%17.01%-2.84%
Cleveland-Elyria, OH 14.25%17.29%-3.04%
Honolulu, HI 26.60%30.36%-3.76%
Cincinnati, OH, KY, IN 17.78%22.68%-4.90%
Kansas City, MO, KS 14.51%19.54%-5.03%
Phoenix-Mesa-Scottsdale, AZ12.23%17.53%-5.30%
Milwaukee-Waukesha-West Allis, WI 13.57%22.15%-8.58%
Detroit-Warren-Dearborn, MI 3.68%14.11%-10.43%
Miami-Fort Lauderdale-West Palm Beach, FL 14.01%25.75%-11.74%
Tampa-St. Petersburg-Clearwater, FL 13.50%25.47%-11.97%
Atlanta-Sandy Springs-Roswell, GA 4.33%16.49%-12.16%

Credit card, student loan, mortgage debt

The rise in the cost of living combined with slow income growth has played a major role in U.S. consumer debt. After adjusting for inflation, household debt has grown 15% faster than household income since 2003, according to NerdWallet’s household debt study.

The map below shows average credit card, student loan and mortgage debt for each state and Washington, D.C. One thing to keep in mind: Not all debt is equal — mortgage and student loan debt can be a foundation for a better financial future. However, credit card debt and other debt with high interest rates drain disposable income.

The map’s credit card and student loan debt averages are for individuals, while average mortgage debt is measured by household. There is no reliable source for average household debt by state, but individual debt is an indicator of how a state’s residents stand relative to other states when it comes to debt.

Click on a category to change the data; darker colors represent higher numbers. (Student loan debt data wasn’t available for North Dakota.)

 

Methodology

To compare incomes and cost of living since 2005 by metropolitan area, we used median household incomes from the 2014 American Community Survey and Consumer Price Index for All Urban Consumers for each year since 2005.

Average credit card debt data per resident in May 2015 are from Experian.

Student loan debt averages per graduate are from The Institute for College Access & Success and are for the 2012-13 academic year. Student loan debt data wasn’t available for North Dakota.

Average mortgage debt per household in 2014 is from Experian.


Image via iStock.