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

Known for its colorful sunsets, year-round sunshine, explosive population growth, and extensive desert landscapes, Arizona is attracting residents from all over. While California consistently remains one of the most desirable places to live for some, many are considering life in Arizona. Although California and Arizona neighbor each other, there are distinct differences between them, including climate, weather, culture, and, most notably, cost of living.

The cost of living index in Arizona is 102.2, meaning it is only about 2% more expensive to live in Arizona than the national average (100). California, on the other hand, has a cost of living index of 149.9, so it’s significantly more expensive than both Arizona and the national average. The median price of a home in Arizona is $349,300, which is about 20% higher than the national average of $291,700. Meanwhile, the median home price in California is $684,800 – a staggering 96% more than Arizona.

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

When you evaluate the fact that the median home price in Arizona is around $350,000, it is substantially more affordable to purchase a home here than in California. In fact, you’ll spend almost double the amount on a home in California, with a median home price of nearly 700,000.

While housing prices have skyrocketed in Arizona in the last year, sales are starting to decrease. With a decrease in demand, the prices may follow as the supply of homes on the market increases. Not to mention, mortgage rates are the lowest they’ve ever been so this is, arguably, the best time to buy a home in Arizona.

California, on the other hand, remains in an affordable housing crisis and in May of 2021, the median home price hit a record high. Although both states are seeing homes receive multiple bids, the situation in California is much more of a home-buying frenzy. Residents in California also continue to flock to more rural areas in the state in search of cheaper housing.

Phoenix, Arizona has one of the hottest real estate markets in the nation. It has recovered from the slump created by the COVID-19 pandemic and the demand for homes has reached new heights. Homes are selling quickly, with about 50% of them selling over the original asking price. The same can be said for many other cities in Arizona as well.

While housing prices in Arizona are slightly higher than other states, it is still almost 100 percent cheaper to purchase a home in Arizona than California.

With a statewide average rent of $1,052, Arizona is considered to be one of the more affordable destinations for renters. Though, the actual rent you pay will vary based on the city you live in Arizona. For example, Scottsdale is the most expensive Arizona city to rent with an average rent of $1,914. The most affordable city to rent in Arizona is Tucson with an average rent of $1,115.

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

In recent years, Arizona has been one of the fastest growing states and low taxes may be a contributing factor in what draws people to the desert. Income tax rates in Arizona are below average and like the federal income tax, rates are based on income brackets. Arizona has four total income tax brackets, with rates ranging from as low as 2.59% to as much as 4.50%. This simply means that lower brackets pay lower rates and higher brackets pay higher rates.

Like Arizona, California also has a progressive income tax. The state has ten total income brackets that start at 1% and increase to a top marginal rate of 13.3%. California’s top marginal rate is the highest in the country, but it only applies to those who make over $1 million of taxable income.

In Arizona, you must pay both state and local taxes on purchases. The statewide sales tax rate is 5.60% but when you take all the local taxes into account, Arizona’s average rate is 8.4%. This rate is the 11th highest sales tax rate in the country.

California also collects a sales tax on goods and services, but their tax goes beyond that. The state has one of the highest minimum sales tax rates in the nation, at 7.25%. Most California cities have even higher rates, due to the numerous extra city and county sales taxes. In fact, only a quarter of California cities actually have a 7.25% sales tax. For example, Los Angeles County’s sales tax is 9.5% and if you travel just a couple miles to Culver City, the sales tax is 10.25%.

The average effective property tax rate (meaning the total taxes paid as a percentage of home value) in Arizona is 0.62%. This rate varies based on the city and county you live, but no Arizona county has an effective property tax rate that is higher than 1.01%, which is only 0.06% lower than the national average of 1.07%. While the sales taxes in Arizona may be high, their property taxes are some of the lowest in the country.

In 1978, Proposition 13 set the maximum allowable property tax rate in California at 1% of a home’s assessed value. It also limited increases in assessed value to 2% each year, unless the home had changed ownership or undertaken construction. This law helps keep property tax payments in California below the national average.

When moving to Arizona or California, transportation is another major expense to consider. At the state level, Arizona lacks public transportation. Instead, it is handled by the individual agencies around the state. If you live in a major metro area in Arizona, you can save money by getting rid of your car and relying on public transit.

The same is the case for California. However, if you live far from your workplace and have to commute, you may want to consider keeping your car. Of course, this will ultimately contribute to higher transportation costs. The transportation cost index in California is 133.1, quite a bit higher than Arizona’s index of 107.

Median household income in Arizona is $53,510, about 20% lower than California and 7% lower than the national average. With this in mind, California residents have much higher earners than both Arizona residents and the national average. However, the unemployment rate in California is quite a bit higher in California than it is in Arizona.

The unemployment rate in California is 8.2% and the unemployment rate in Arizona is 6.5%. Both rates are higher than the national average of 6.0%.

Food and grocery expenses are another factor to consider when determining the cost of living in a particular location. If you chose to live in Arizona over California, you’re looking at spending about 19 percent less on groceries.

California’s grocery cost index is only slightly higher than the national average of 100 – sitting at approximately 105.1. Arizona’s grocery index, on the other hand, is below the national average at 96.1. Refer to the following table for a more comprehensive comparison of the average prices for a variety of food items in Arizona vs. California: