What Is The Cost Of Living In New Mexico Vs. Texas?

With its temperate climate, numerous opportunities for outdoor adventure, abundance of natural beauty, and rich culture, many view New Mexico as being more advantageous to live in than Texas. However, there is still much to love about Texas, as the state offers tons of jobs, both urban and rural locations, a favorable climate, and plenty to see and do for newcomers. Aside from each state’s unique offerings, how do they stack up in terms of cost of living?

The cost of living index in New Mexico is 88.4, meaning it is about 12% more affordable to live in New Mexico than the national average (100). Texas, on the other hand, has a cost of living index of 93.9, so it is more expensive than New Mexico but still less than the national average. The median price of a home in New Mexico is $246,000, which is close to 16% lower than the national average of $291,700. Meanwhile, the median home price in Texas is $243,600 – relatively on par with New Mexico.

Aside from median housing prices, let’s take a deeper look at how the cost of living compares in New Mexico vs. Texas.

When you consider the fact that the median home price in New Mexico is $246,000, it is only slightly more expensive to purchase a home here than in Texas. With Texas’ median home price of $243,600, homes are less than a percent higher in New Mexico. Regardless, both states carry the advantage of housing prices being below the national average.

Over the past year and a half, the real estate market in Albuquerque, New Mexico took a bit of wild ride. Like much of the country, New Mexico experienced a buying frenzy as record-low interest rates lead to a high demand for homes. While the market is starting to steady, homes are still receiving multiple offers and some buyers are paying over the list price.

Rural New Mexico, on the other hand, also saw a surge in real estate as people from America’s cities moved to rural towns and villages all across the nation. With interest rates low, both those that are new to the region and locals are looking to buy. However, there is simply no housing and it’s a classic case of supply and demand imbalance.

In the past year, Texas home prices have risen by about 8.5 percent, caused by the limited inventory and high demand. Like New Mexico, homes in Texas are getting multiple offers and a large majority of them are selling for above the asking price. Although it might be a good time to be a seller in both New Mexico and Texas, the situation is not as ideal for buyers.

As buyers compete, homes are getting more and more expensive in both New Mexico and Texas. Though, with both states experiencing quite a bit of competitive, higher-than-normal asking prices, and a supply and demand disproportion, housing costs are only about 1% more expensive in New Mexico than Texas.

Of course, in either state, prices vary based on the city you live in. For example, while most New Mexico cities have prices below the national average, the median home price in Santa Fe is $470,000. The same is true for Texas, as most cities are below the national average but places like Austin are above.

In the United States, there are twenty-one states that have average rents under $1,000 per month. At just $844 per month for 2021, New Mexico has the 15th-lowest average monthly rent in the country. In fact, the state can be considered one of the more affordable locations for renters. Generally speaking, states with the lowest average rental rates tend to also have low overall costs of living, and this is certainly true for New Mexico.

With that said, refer to the following table for the average monthly rent in some of the various cities across the state of New Mexico:

From 2019 to 2020, average rental rates dropped in 12 states in the U.S., with Texas included. At just $1,045 statewide, average monthly rental prices in Texas cities are typically below the national average. Like New Mexico, rents vary across the state of Texas based on where you live. For instance, Flower Mound, Texas has the most expensive rates in the state at $1,685, while the city of Brownsville is the most affordable place for renters in Texas, at just $730 a month. Though, rents are still cheaper overall in New Mexica than Texas.

The table below displays a more detailed look at the average rent you can expect in some of Texas’ major cities:

New Mexico has a progressive income tax system, modeled after the federal income tax. However, the state has fewer income tax brackets and much lower rates. There are four income brackets in total, with rates ranging from as low as 1.7% to as much as 4.90% for New Mexico residents who make over $16,000 in taxable income. New Mexico’s income tax rates rank among the 20 lowest rates in the nation.

Texas, on the other hand, is one of the select few states in the country that does not levy a state income tax. This means that whether you’re a doctor, lawyer, real estate agent, dentist, or nanny, you do not have to pay any sort of state income tax on your earnings in Texas. You do, however, still have to file your federal income tax return and pay your federal income taxes annually.

The state of New Mexico does not technically have a sales tax. It does, however, have a gross receipts tax. Businesses are charged this tax, which is collected at the state, county, and city levels. The tax is often passed along to consumers by either adding it to the purchase price or notating it on the invoice. New Mexico’s statewide gross receipts tax is 5.125%, while the additional county and city taxes can total 4.12%. This means that the highest gross receipts tax you could pay in New Mexico is 9.25%.

Texas, on the other hand, does levy a sales tax. The statewide sales tax rate is somewhat modest – at just 6.25%. Though, when you consider all the extra city and county taxes in Texas, 8.25% is the highest sales tax rate that you could be subjected to in the state. Sales tax rates in the majority of Texas’ major cities – like Houston, Dallas, and San Antonio – do charge an 8.25% sales tax.

New Mexico’s average effective property tax rate is 0.78%, meaning homeowners in the state pay 0.78% of their home’s assessed value in property taxes each year. This rate is the 18th lowest in the country. Property taxes in New Mexico go towards supporting schools and local governments.

Dissimilarly, Texas has some of the highest property taxes in the nation. The average effective property tax rate in Texas is an astounding 1.69%, meaning Texans pay 1.69% percent of their home’s market value in taxes annually. This equates to a statewide average of $3,390 in annual property tax payments for Texas homeowners. Texas property taxes have long been an issue for between the local governments and the state.

Whether you choose to live in New Mexico or Texas, transportation costs are another factor that you must consider in order to determine the cost of living in either state. These include expenses like gas prices, new vehicle purchase prices, and public transportation fees. Transportation costs in New Mexico are about 18% lower than the national average, while Texas’ transportation costs are generally above the national average.

With New Mexico’s transportation cost index of 84.6 and Texas’ transportation cost index of 103.3, these expenses are, overall, quite a bit more affordable in New Mexico than Texas.