A big expense: Transportation
After housing, transportation is the second biggest expense for most households, according to the Center for Neighborhood Technology, or CNT, in Chicago. Costs can be high, whether residents drive their own cars or use public transportation.
"The first calculation when it comes to choosing a place to live should be this: You don't live your life in your home, you live it outside your home," says John McIlwain, former chair for housing at the Urban Land Institute in Washington, D.C.
Housing + Transportation
The CNT developed the "H + T Affordability Index" to address the link between housing costs and transportation costs in more than 300 metropolitan regions.
While homeowners generally are urged to keep housing costs to no more than 31 percent of income, CNT estimates that combined costs of housing and transportation should not exceed 45 percent of income.
Many home shoppers budgeting for a new home weigh their monthly payment, taxes and insurance, "but they don't always estimate their transportation costs," says Scott Bernstein, president of CNT.
Costly, long commutes
"Many people opt to 'drive until you qualify,' driving to neighborhoods where the housing costs are lower, not considering the transportation costs associated with living far from their jobs," he says.
McIlwain says it's a mistake to think of transportation costs purely in terms of commuting.
"For every five miles that the average person drives, only one mile is for commuting," says McIlwain. "People need to think about the compactness of their neighborhood, how far they need to drive to reach places like the grocery store, school and medical offices."
Another expense: Taxes
Taxes are especially important when comparing the overall cost of living in one area to another.
"Property taxes will be estimated on each home listing, but everyone should also review sales taxes and state and local income taxes," Luetjen-Keeler says. "Some states also have personal property taxes on items such as cars and boats which can add to the cost of living."
Bankrate provides a list of state income and sales tax rates.
Insurance and utilities
Luetjen-Keeler recommends people contact their insurance agent to receive an estimate of the costs of car insurance and homeowners insurance in the new location. People moving to a flood-prone or tornado-prone area may find they need additional hazard insurance.
Car insurance costs depend not only on the car and driver, but also regional theft and accident rates.
Utility costs also vary from region to region.
"Utility costs have a lot to do with the size of the property and the energy efficiency of the design and the systems," says McIlwain. "The best way to estimate them is to get copies of the utility bills from the owners."
Even the cost of basic groceries and medicines can vary from place to place. To compare these costs, try Bankrate's cost of living calculator by entering income and location along with a new location. This will give you an estimate of the cost-of-living difference.
For example, someone earning $200,000 in Washington, D.C., would need 21 percent more income to maintain a similar lifestyle in New York City's Brooklyn borough. By contrast, that same D.C. resident could earn 30 percent less in Dallas and still maintain a similar lifestyle.
Homeowners fees are another variable cost.
"It's very important for people to know what the fees are and what they cover in terms of amenities and maintenance," says Luetjen-Keeler. "You need to look at the association's finances and ask about the rate of increase in fees."
Of course, costs are not the only factor in deciding whether or not to relocate, McIlwain says.
"I think the primary consideration should be quality of life," he says. "As long as they can afford to live there and still save for retirement, people should choose where they want to live."