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

With its central location, cultural diversity, lack of state income tax, and plentiful job opportunities, many view Texas as a more advantageous place to live than Michigan. However, there is still much love about Michigan, as it provides access to both small-town and urban living and is one of the most beautiful states in the country. Aside from each state’s unique advantages, how do they 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). Michigan, on the other hand, has a cost of living index of 89.6, so it is significantly more affordable 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 Michigan is $207,800 – about 15% less than Texas.

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

When you consider the fact that Texas’ median home price is close to $244,000, it is more expensive to purchase a home here than in the state of Michigan. Though, with Michigan’s median home price of nearly $208,000, you’ll only end up spending about 17% more for a house in Texas.

Over the course of the past year, Texas home values have increased by approximately 8.5 percent. A limited inventory of homes is the major contributing factor to the rise in prices. In fact, there are fewer homes for sale in Texas right now than at any point during the last two decades. Texas, like much of the country, is experiencing a classic case of supply and demand imbalance. Homes that are on the market are receiving multiple offers because of the high demand, with many of them selling for higher than the asking price.

A very similar situation is taking place in Michigan, as Michigan’s housing market is probably the most competitive it has ever been. Homes are experiencing double-digit sale price increases but even with fewer homes on the market, the low interest rates are still attracting buyers. The current market is forcing home buyers to change their strategy, including making offers at the top of their price range or expanding their initial search area.

In both Texas and Michigan, it is an excellent time to sell a home but home buyers are facing more competition and higher prices than ideal. Regardless, even with the increase in home prices, it is still cheaper to purchase a home in Michigan than Texas.

As buyers compete, homes in Michigan are getting more and more expensive. But, more affordable housing remains an advantage to settling in Michigan over Texas. However, it’s important to note that, prices do vary based on the city you live in either state. For example, while most Texas cities have prices below the national average, the median home price in Austin is over $550,000. The same is true for Michigan, as most cities are below the national average but places like Ann Arbor are above.

While there may be some cities in both Texas and Michigan that have higher home prices than other U.S. states, housing costs are still about 22% in Michigan than Texas.

Between 2019 and 2020, average monthly rent decreased in 12 U.S. states, and Texas was among them. With a statewide average monthly rental price of $1,045 a month, rent in Texas cities tends to trend lower than the national average. However, rent can vary considerably based on where you live in the state. For example, the city of Flower Mound has the most expensive rent in the state at $1,685, while Brownsville’s rental rates are the most affordable at just $730 per month.

With that said, the following table outlines the average monthly rent for some of the various cities throughout the state of Texas:

In the U.S, there are twenty-one states that have average rents under $1,000 a month. With a statewide average monthly rent of $871, Michigan is considered an affordable place for renters to live. Generally speaking, states that have the lowest rental prices also typically have some of the lowest overall costs of living, which certainly holds true for Michigan. Though, rent varies based on where you live in Michigan. For example, Allendale has the most expensive rates in the state, at $1,611, but Flint apartments are the most affordable, just $629 per month.

The table below displays a more comprehensive look at the average rent you can expect in some of Michigan’s most well-known cities:

One of the advantages of living in Texas instead of Michigan is the fact that there is no state income tax. In fact, the state is among a select few in the U.S. that do not have a personal income tax. This means that regardless of your income level, when tax season rolls around you don’t have to file a state income tax return or pay any taxes on your income in Texas. You do, however, still have to file a federal income tax return and pay your federal income taxes – but nothing is required at the state level.

Michigan, on the other hand, has what’s known as a flat income tax system. This means that, regardless of your income level, all income earners pay 4.25% of taxable income. For states with a flat tax, this is one of the lowest rates. Though, some Michigan cities also collect their own income taxes – ranging from as little as 1% to as much as 2.40% for residents. For non-residents that work on those areas, you must pay half the residential rate.

At just 6.25%, Texas’ minimum sales tax rate is somewhat modest. Though, when you factor in all the extra city and county taxes levied across the state, the highest sales tax rate you could pay in Texas is 8.25%. Houston, Dallas, San Antonio, and most of the other major cities in Texas have the maximum sales tax rate.

Unlike Texas, and most other states in the U.S., there are no city or county sales taxes in Michigan. There is only a flat sales tax rate. This means that no matter where you are in Michigan, you will pay the same 6% in sales tax. The rate is lower than most other states in the region and there are a number of goods that are not taxed, such as groceries, medications, and newspapers.

Whether you’re thinking about purchasing a home in Texas or Michigan, you need to consider property taxes. In Texas, property tax rates are some of the highest in the nation. The state’s average effective property tax rate is 1.69%, meaning Texas homeowners pay a staggering 1.69% of their home’s value in property taxes ever year. This equates to about $3,390 in property taxes annually, on average.

Property taxes in Texas have been a long-standing problem between state and local governments. While many representatives have tried to limit the rates in the past, most cities and counties oppose it because property taxes are a primary source of income for certain areas.

Like Texas, Michigan has some of the highest property taxes in the U.S. Residents of the Great Lakes State pay an average effective rate of 1.45% of their home’s assessed value in property taxes each year. Since properties are assessed and taxes are collected at the local level, the amount of property taxes paid varies quite a bit from one area to the next. For instance, Leelanau County’s effective property tax rate is just 0.87%, but Wayne County’s is 2.35%.

While Texas has a higher cost of living overall, transportation is one area where you’ll actually see cost savings. Transportation costs include expenses like gas prices, new vehicle purchase prices, and public transportation costs. The transportation cost index in Texas is 103.3, which is higher than Michigan’s transportation cost index of 115.1.

Although both states are above the national average, based on the table below, you can expect cheaper public transportation, more affordable vehicles, and lower gas prices in Texas than Michigan.