What Is The Cost Of Living In Texas Vs. Arizona?

While Arizona offers colorful sunsets, an expansive desert landscape and year-round sunshine, Texas is centrally located, culturally diverse, and has numerous job opportunities. If you’re trying to relocate and can’t decide whether Texas or Arizona is better for you and your family, cost of living is an important consideration. Oftentimes, it is the main factor that people use to decide whether they want to live in one place versus another. So, how do these two states stack up in terms of cost of living?

The cost of living index in Texas is 93.9, meaning it is about 6% more affordable to live in Texas than the national average (100). Arizona, on the other hand, has a cost of living index of 102.2, so it is more expensive than both Texas and the national average. The median price of a home in Texas is $243,600, which is about 16.5% less than the national average of 291,700. Meanwhile, the median home price in Arizona is $349,300 – about 43% higher than Texas.

Aside from median housing prices, let’s examine how the cost of living compares in Texas vs. Arizona.

When you evaluate the fact that Texas’ median home price is close to $244,000, it is substantially more affordable to purchase a home here than in the state of Arizona. In fact, you’ll end up spending almost 50% on a home in Arizona, with a median home price of nearly $350,000.

Over the last year, home values in Texas have climbed by about 8.5 percent. The major contributing factor to the rise in prices is a limited inventory of homes. In fact, there are fewer homes for sale in Texas currently than at any point over the last two decades. The state, like much of the U.S., is experiencing a supply and demand imbalance. Homes on the market are also getting multiple offers, with many of them selling for more than the original asking price.

Like Texas, housing prices in Arizona have skyrocketed in the last year. However, sales are starting to decrease and with a decrease in demand, the prices may follow suit as the supply of homes for sale goes up. While the situation in both Texas and Arizona favors sellers, it is, arguably, one of the best times to buy a home in Arizona – as the mortgage rates are the lowest they’ve ever been. However, the competition and higher home prices are still not ideal.

Regardless, even with the higher median home prices, it remains more affordable to purchase a home in Texas than in Arizona.

Currently, Phoenix has one the hottest real estate markets in the country. It has recovered wonderfully from the slump that occurred as a result of the COVID-19 pandemic but the demand for homes is at an all-time high. Homes in Phoenix are selling fast, with roughly 50% selling for above the original asking price. The same situation is occurring in many other Arizona cities as well.

However, more affordable housing is considered a significant advantage of living in Texas over Arizona. Of course, homes are a little pricey in places like Austin, but if you choose to settle in cities like Dallas, Fort Worth, and Houston, median home prices are actually much lower than the national average.

While there may be some Texas cities that have higher home prices than other U.S. states, housing costs are still about 28% cheaper than Arizona.

From 2019 to 2020, the average monthly rent dropped in 12 U.S. states, with Texas being one of them. With a statewide average rental rate of $1,045 a month, rent in Texas cities tends to trend lower than the national average. However, rental prices do vary quite a bit based on where you live in the state. For instance, the city of Flower Mound has the most expensive rental prices in the state at $1,685, while Brownsville’s rental rates are the cheapest at just $730 per month.

With that said, the following table below displays the average monthly rent for some of the various cities in Texas:

With an average statewide rent of just $1,052, Arizona is known as one of the more affordable places to live for renters. Though, like Texas, the actual rent you pay will vary depending on the Arizona city you live in. For example, Scottsdale is the most expensive place to rent with an average rent of $1,914 per month. Whereas, the most affordable city to rent in Arizona is Tucson, with an average monthly rent of $1,115.

Refer to the table below for a more comprehensive understanding of the average rental prices you can expect in some of Arizona’s major cities:

Fortunately, one of the many benefits of living in Texas is the fact that there is no state income tax. It is among a select few states in the country that have no personal income tax. This means that whether you’re a doctor, lawyer, teacher, real estate tycoon, or nanny, when tax season rolls around you don’t have to file a state income tax return or pay any taxes on your income in the state of Texas. You do, however, still have to file a federal income tax return and must pay your federal income taxes – but nothing is required at the state level.

Arizona, on the other hand, has state income tax rates that are below average. Like federal income taxes, rates are based on income brackets. Arizona has four total income tax brackets, with rates that range from as low as 2.59% to as much as 4.50%. This simply means that you pay based on how much you make.

At just 6.25%, Texas’ base sales tax rate is relatively modest. Though, when you add up all the additional city and county taxes charged across the state, the highest sales tax rate you could pay in Texas is 8.25%. Unfortunately, most major cities in Texas – like Houston, Dallas, and San Antonio – do reach this sales tax limit.

Like Texas, you must pay both state and local taxes on your purchases made in Arizona. The state has a lower base rate than Texas, at just 5.60%. However, when you consider all the local taxes, Arizona’s average rate is 8.4% and you could pay as much 11.20% in sales tax depending on where you’re at in the state. This is the 11th highest average sales tax rate in the nation.

Whether you’re thinking about purchasing a home in Texas or Arizona, you must consider the property taxes. In Texas, property taxes are some of the highest in the country. The state has an average effective property tax rate of 1.69%, meaning Texans pay 1.69% of their home’s value in property taxes annually. This translates to the average Texas homeowner paying a staggering $3,390 in property taxes each year. Texas property taxes have been a long-standing problem between state and local governments. While some representatives want to limit property tax rates, most cities and counties resist this idea, as the property taxes are their primary source of income.

Arizona, however, makes up for their high sales taxes by having some of the lowest property taxes in the country. The average effective rate in Arizona is 0.62%, which is far below the national average of 1.07%. While the rate varies based on the city and county you live in, no Arizona county has a property tax rate that is higher than 1.01%.

When moving to Texas or Arizona, transportation is another major expense you must consider. Arizona lack public transportation at the state level. It is instead handled by individual agencies throughout the state. If you live in a major metropolitan area in Arizona, you can save some money by selling your car and choosing to rely on public transportation.

With Texas being such a sprawling state, you’ll likely benefit from having a car. However, this will contribute to higher transportation costs. Texas’ transportation cost index of 103.3 and Arizona’s transportation cost index of 107, expenses like gas prices, new vehicle purchase prices, and public transportation costs are more affordable in Texas than Arizona.