Is this HCOL or not?

[August26th]

Mountain West town (Colorado Springs, CO.)

I just have no idea if it's HCOL or not. My guess is yes, but how do I verify?

Average home sales price is roughly 550K. What other data can I access to confirm this specific city either way? Denver and Colorado Springs are not the same animal (for now,) so just hoping to understand where this city falls in the COL category.

 Thank you.

[Chris Pascale]

I bought my home for $500k, and think that's pretty high.

But there are also other factors, and perhaps you can do a comparison to where I live:

 - Gas is about $3.70
 - $6 for half-gallon of grass fed whole milk
 - Local universities (high-quality public and private) only 10 miles away and costs $12,000 & $15,000 year. Community college even closer
 - Good public schools
 - Sales tax nearly 9%
 - State income tax

[MaybeBabyMustache]

I live in the bay area, so those numbers definitely don't seem HCOL to me. What is your goal in figuring this out? The answer might sway the input you get.

Here's a link to an article about how HCOL is defined for the US.

https://www.investopedia.com/terms/c/cost-of-living.asp. The usual suspects were all on the list (NYC, San Francisco, Honolulu, etc)

[August26th]

I guess the goal is just to know were my city stands. I’ve seen plenty of MMM people post case studies and say they are HCOL, MCOL, LOCL with such certainty, and I am curious where my city stands, and how that fits into my overall financial goals.

The internet says it’s about 6% higher overall than the national average. But in my line of work I talk to many people who think our area’s housing costs are pretty high. I’ve lived in two other states in my lifetime other than Colorado (Texas and North Carolina) and my current city seems higher in almost every way than anywhere else I’ve lived, but didn’t have the data to declare that with certainty. 

[Tasse]

I live outside of Denver and I usually describe this as a medium COL area. It's not really comparable to either Southern California or the suburban Midwest (two other places I have lived).

[ChpBstrd]

It's sorta an academic exercise to pick whether an area is MCOL or HCOL. You have to pick a criteria to decide:

-Divide the RE market into 3 equal parts and call them low, middle, and high (this assumes we're only interested in prices relative to other markets)
-Set by % of median income needed to make payments on a median home (remember the old <30% advice?)
-Low: young people can afford a home, Medium: professionals can afford a home, High: only rich people can afford a home

Personally, I would call a place with a $550k price tag for a basic home low-end HCOL.

[Villanelle]

Here's a COL calculator that allows you to compare cities, and offers some breakdowns of what budget categories are higher or lower, and by how much.  There is additional info behind a paywall, but I haven't paid and still find it useful .

I'd consider Colorado Springs to be high-medium COL, but those terms are all highly subjective. 

And since you mention housing, remember that other factors go into COL.  If housing is more expensive but healthcare, groceries, and utilities are all much less, the overall difference might not be much.  I was recently looking at Fairbanks, Alaska, for example, and since it is remote, some of the other categories are much higher, but housing seems somewhat moderate.  Compared to my current home, it says housing is about 50% less, but utilities are 30% more and healthcare is 25% more.  (Among some of the categories it breaks out.)  Overall, it says Fairbanks is about 30% less.  So it's not as cheap as it might seem if just looking at housing (which, again, is 50% less).  Of course all these % are just averages.  If you need a massive home, then the lower housing costs will have more of an effect.  If you have significant health issues, the higher healthcare costs will affect you more.  But it gives an overall sense, and definitely shows there's more to COL than housing alone. 

https://www.bestplaces.net/cost-of-living/

[FINate]

https://www.bestplaces.net/cost_of_living/city/colorado/colorado_springs

The cost of living index for Colorado Springs is 108 (vs US national average 100). The above link breaks COL down by category, which shows slightly higher housing prices offset by lower costs in other categories.

It's a solidly MCOL city.

ETA: I'm a big fan of MCOL areas. LCOL areas may, though not always, have issues causing the low values (economically depressed, crime, etc.). Whereas HCOL areas, and especially VHCOL, are expensive for good reasons yet are well past the point of diminishing returns. It's like buying a $200 bottle of wine... is it better than a $40 bottle? Probably, but it's not $160 better. IMO, many MCOL areas offer a lot better value for most people.

[ChpBstrd]

One issue with any metric is that we're in a housing bubble, which has caused formerly LCOL areas like Colorado Springs to become M/H COL areas.

Median house prices have risen by more than they did in the 2002-2007 housing bubble, and in nearly half the time. Between 2Q2002 and 1Q2007 (19 quarters), median home prices rose 47%. Between 2Q2020 and 4Q2022 (10 quarters), prices rose 47.5%.



To be clear, this is not normal. As the chart below shows, housing prices typically rise at a much slower pace. Also keep in mind that much of the long-term growth in median prices is due to the average size of new houses increasing dramatically in that time frame.

[Dicey]

This is very subjective. Just for grins, I plugged in my Bay Area (CA) city vs. Colorado Springs. I arbitrarily chose $80k for income. Then I tried some other examples.

Bay Area City (where we live): What takes $80k here would only require $43,800 in CO Springs. Your housing is 57% cheaper.

SoCal Desert City (where our rentals are): What takes $80k would only require $71,154 and your housing is 18% cheaper.*

Aspen, CO (because we have family there) What takes $80k in Colorado Springs would only get you $28,323 in Aspen. Your housing is 85% cheaper. LMAO.

It's a rule of thumb, not an absolute. We paid a bit below the current median price ($1,025k) ten years ago. Our house is "worth" twice that and then some these days. Meh. BTW, it's a nice house, but it's relatively normal for here. Not a mansion by any means.

*The rentals are nice single family houses, in a fancy gated resort community, with loads of amenities. All three combined are worth less than the one Bay Area house.

[Ron Scott]

I guess the goal is just to know were my city stands. I’ve seen plenty of MMM people post case studies and say they are HCOL, MCOL, LOCL with such certainty, and I am curious where my city stands, and how that fits into my overall financial goals.

I don’t think it’s helpful to make any assumptions about what someone on this forum means when they say HCOL without being more specific than that.

[August26th]

I guess the goal is just to know were my city stands. I’ve seen plenty of MMM people post case studies and say they are HCOL, MCOL, LOCL with such certainty, and I am curious where my city stands, and how that fits into my overall financial goals.

I don’t think it’s helpful to make any assumptions about what someone on this forum means when they say HCOL without being more specific than that.

Huh? I honestly have no idea what you’re trying to say here. Can you clarify?

[GilesMM]

Housing > $1500/sq ft = VHCOL
Housing > $1000/sq ft = HCOL
Housing > $500/sq ft = MCOL
Housing < $500/sq ft = LCOL

[Ron Scott]

I guess the goal is just to know were my city stands. I’ve seen plenty of MMM people post case studies and say they are HCOL, MCOL, LOCL with such certainty, and I am curious where my city stands, and how that fits into my overall financial goals.

I don’t think it’s helpful to make any assumptions about what someone on this forum means when they say HCOL without being more specific than that.

Huh? I honestly have no idea what you’re trying to say here. Can you clarify?

The terms are relatively undefined. You might call my city MCOL while I call it HCOL. Confusion ensues. Communication suffers. That help?

[Chris Pascale]

I live in the bay area, so those numbers definitely don't seem HCOL to me. What is your goal in figuring this out? The answer might sway the input you get.

Here's a link to an article about how HCOL is defined for the US.

https://www.investopedia.com/terms/c/cost-of-living.asp. The usual suspects were all on the list (NYC, San Francisco, Honolulu, etc)

Just visited family there. For $900k they have a 2-bedroom condo.

[Must_ache]

https://www.bestplaces.net/cost_of_living/city/colorado/colorado_springs

The cost of living index for Colorado Springs is 108 (vs US national average 100). The above link breaks COL down by category, which shows slightly higher housing prices offset by lower costs in other categories.

It's a solidly MCOL city.

Agreed, I found another index that says Colorado Springs is 105. 

Here's a map that shows it by STATE, but there could be huge differences on a CITY level.  It would be easier if we could assign a percentile to it. "Medium" is still a pretty wide range; is that 100-120? 

https://meric.mo.gov/data/cost-living-data-series

[Must_ache]

I found cost of living data for 500 cities.  The data is quite skewed.  The average cost of living is in Augusta, ME but it is 73rd percentile among cities.  Colorado Springs came in at 102.2 which was 79th percentile.  I guess I would have to call it medium-high.  So while your cost of living is medium/average, it is still higher than 4/5 of the population.

Here is an example of what the 10 deciles look like:
00 Beckley, WV (80.0)
10 Kingsport, TN (86.0)
20 Toledo, OH (87.5)
30 Las Cruces, NM (88.8)
40 Appleton, WI (90.7)
50 Columbia, SC (91.9)
60 Syracuse, NY (95.1)
70 Jacksonville, FL (99.0)
80 Salisbury, MD (103.2)
90 Manchester, NH (109.6)
91 Corvallis, OR (110.6)
92 Denver, CO (112.1)
93 Worcester, MA (113.2)
94 Riverside, CA (116.1)
95 Sacramento, CA (120.3)
96 Bozeman, MT (125.3)
97 Boston, MA (132.6)
98 Salinas, CA (138.3)
99 Napa, CA (149.6)
100 San Francisco, CA (178.6)

(AdvisorSmith cost of living index, a couple years old)

Des Moines, where I live, is 91.7 so pretty close to the median, but 8.3% below average.  I live in the weestern suburbs and with the higher home prices there it wouldn't surprise me if my area was 60th-70th percentile and closer to average.

[FINate]

https://www.bestplaces.net/cost_of_living/city/colorado/colorado_springs

The cost of living index for Colorado Springs is 108 (vs US national average 100). The above link breaks COL down by category, which shows slightly higher housing prices offset by lower costs in other categories.

It's a solidly MCOL city.

Agreed, I found another index that says Colorado Springs is 105. 

Here's a map that shows it by STATE, but there could be huge differences on a CITY level.  It would be easier if we could assign a percentile to it. "Medium" is still a pretty wide range; is that 100-120? 

https://meric.mo.gov/data/cost-living-data-series

I don't know where exactly to draw the lines, and I'm not super interested in debating precise semantics on this. BUT, Colorado Springs is so close to the national average that if it's not MCOL then essentially nothing is.

[Louise]

Housing > $1500/sq ft = VHCOL
Housing > $1000/sq ft = HCOL
Housing > $500/sq ft = MCOL
Housing < $500/sq ft = LCOL

The MCOL number seems really high to me. A 1500 sq ft house would be $750K. Does that include property taxes, insurance, etc.?

[TheAnonOne]

Housing > $1500/sq ft = VHCOL
Housing > $1000/sq ft = HCOL
Housing > $500/sq ft = MCOL
Housing < $500/sq ft = LCOL

We bought our absolutely unneeded 4200 sqft castle in the metro area of the midwest for $530,000. Which I thought, at the time, was extremely expensive here.

$125/sqft. ($165/sqft after it appreciated to $700k+)

By your metrics we live in a 3rd world nation, yet, it's a major metro. This house would have to be $2.1 million dollars before barely being MCOL.

[Villanelle]

https://www.bestplaces.net/cost_of_living/city/colorado/colorado_springs

The cost of living index for Colorado Springs is 108 (vs US national average 100). The above link breaks COL down by category, which shows slightly higher housing prices offset by lower costs in other categories.

It's a solidly MCOL city.

Agreed, I found another index that says Colorado Springs is 105. 

Here's a map that shows it by STATE, but there could be huge differences on a CITY level.  It would be easier if we could assign a percentile to it. "Medium" is still a pretty wide range; is that 100-120? 

https://meric.mo.gov/data/cost-living-data-series

If 100 is truly average (mean?  median?) then I think the "medium" range needs to straddle that .  Maybe 90-110 or 85-115. 

By either definition, Colorado Springs would be solidly middle.  I'm sure, as with any area, there are neighborhoods that cost more or less, and since it is >100, you could maybe argue that it is high-medium, but definitely still medium. 

[simonsez]

One issue with any metric is that we're in a housing bubble, which has caused formerly LCOL areas like Colorado Springs to become M/H COL areas.

Median house prices have risen by more than they did in the 2002-2007 housing bubble, and in nearly half the time. Between 2Q2002 and 1Q2007 (19 quarters), median home prices rose 47%. Between 2Q2020 and 4Q2022 (10 quarters), prices rose 47.5%.



To be clear, this is not normal. As the chart below shows, housing prices typically rise at a much slower pace. Also keep in mind that much of the long-term growth in median prices is due to the average size of new houses increasing dramatically in that time frame.

You're saying median in the text but the graphs you pasted use the average per the table titles - which is going to show more movement compared to numbers using the median.

People don't buy/sell proportionately across the various SES strata.  Moving can have significant economic barriers to entry.  A lot of the country stays put while upper middle and upper class people chase ever higher wages and more luxurious abodes while we all collectively wonder just how high prices will go.  Thus, even using the median sales price over a given time period is going to skew toward what "rich people" are doing and not necessarily a random citizen who could be anywhere on the financial spectrum.

Sure, my own home's value has gone up more than "usual" but the % increase is lower compared to the coasts and in absolute terms, it still feels "reasonable" here in flyover country.  Plenty of 1500-2000 sq ft 3 BR brick mid-20th Century homes in the 250-450k range.  And if that's too much, plenty of suburbs, exurbs, and rural areas that can offer lower prices per sf.

This paragraph is more rhetorical or aimed at the people creating the data and not anyone in this thread - similarly, for "average" home size, why not use the median?  Unless you want to show more change stemming from the McMansion people really driving up the average, I just don't think that's fully reflective of people in the middle percentiles who might live in MCOL areas.  Sure, houses have grown in size, no doubt.  I just don't understand why anyone would willingly choose to use an average to show central tendency when dealing with something really right-skewed like real estate prices or real estate square footage.  Your point will be 98% the same, just use the median!

[simonsez]

Median house price sold in 2023 Q2: $416k

https://fred.stlouisfed.org/series/MSPUS

That's a larger delta compared to the average than I would have guessed.  I suppose the skewness is even more pronounced via the McMansions to have a median and average be ~80k apart (avg at ~500k, median at 416k).

[Cassie]

I suspected that Reno’s COL was inching to the high range and that chart shows it at 121.

[Villanelle]

Median house price sold in 2023 Q2: $416k

https://fred.stlouisfed.org/series/MSPUS

That's a larger delta compared to the average than I would have guessed.  I suppose the skewness is even more pronounced via the McMansions to have a median and average be ~80k apart (avg at ~500k, median at 416k).

I think much of this is driven by the fact that there's a hard floor at the bottom of prices.  Even if homes are selling for $5000 somewhere, that's about as low as they can get.  But the sky's the limit.  So if the median is $416k, that rare $5k house is about 1% of the median.  But the $100m homes are 240% of the median.  If one of each of those--$5k, 416k, and $100m-- sells, the average/mean is $33m!  So a few very expensive homes can drive up the mean much more than a few very cheap homes, so it make sense that the mean and median would be pretty far off. 

[August26th]

I guess the goal is just to know were my city stands. I’ve seen plenty of MMM people post case studies and say they are HCOL, MCOL, LOCL with such certainty, and I am curious where my city stands, and how that fits into my overall financial goals.

I don’t think it’s helpful to make any assumptions about what someone on this forum means when they say HCOL without being more specific than that.

Huh? I honestly have no idea what you’re trying to say here. Can you clarify?

The terms are relatively undefined. You might call my city MCOL while I call it HCOL. Confusion ensues. Communication suffers. That help?

Yes it does. Thank you.

[ChpBstrd]

One issue with any metric is that we're in a housing bubble, which has caused formerly LCOL areas like Colorado Springs to become M/H COL areas.

Median house prices have risen by more than they did in the 2002-2007 housing bubble, and in nearly half the time. Between 2Q2002 and 1Q2007 (19 quarters), median home prices rose 47%. Between 2Q2020 and 4Q2022 (10 quarters), prices rose 47.5%.



To be clear, this is not normal. As the chart below shows, housing prices typically rise at a much slower pace. Also keep in mind that much of the long-term growth in median prices is due to the average size of new houses increasing dramatically in that time frame.

You're saying median in the text but the graphs you pasted use the average per the table titles - which is going to show more movement compared to numbers using the median.

People don't buy/sell proportionately across the various SES strata.  Moving can have significant economic barriers to entry.  A lot of the country stays put while upper middle and upper class people chase ever higher wages and more luxurious abodes while we all collectively wonder just how high prices will go.  Thus, even using the median sales price over a given time period is going to skew toward what "rich people" are doing and not necessarily a random citizen who could be anywhere on the financial spectrum.

Sure, my own home's value has gone up more than "usual" but the % increase is lower compared to the coasts and in absolute terms, it still feels "reasonable" here in flyover country.  Plenty of 1500-2000 sq ft 3 BR brick mid-20th Century homes in the 250-450k range.  And if that's too much, plenty of suburbs, exurbs, and rural areas that can offer lower prices per sf.

This paragraph is more rhetorical or aimed at the people creating the data and not anyone in this thread - similarly, for "average" home size, why not use the median?  Unless you want to show more change stemming from the McMansion people really driving up the average, I just don't think that's fully reflective of people in the middle percentiles who might live in MCOL areas.  Sure, houses have grown in size, no doubt.  I just don't understand why anyone would willingly choose to use an average to show central tendency when dealing with something really right-skewed like real estate prices or real estate square footage.  Your point will be 98% the same, just use the median!

This is a very fair point and I acknowledge the mistake of saying median in the text while using average in the charts (was looking at both and got mixed up!).

The difference between average and median is real, due to the effects of McMansions as noted. But notice that the difference  between median and average has remained fairly consistent for the past 20 years. I agree with the point being "98% the same" because by either metric the housing market looks like a bubble bigger than the one preceding the GFC.




In terms of the wealthier classes chasing jobs very often and being the key demographic trading houses, I would point out that this demographic is the competition for those "people in the middle percentiles who might live in MCOL areas." If the job-hoppers bid up the price of housing, your rent rises, you still have to pay a higher cost for housing when you buy, your kids have to pay a higher cost for housing when they rent or buy, and you have to pay a higher cost when you upsize or upgrade. Yes, the folks who locked in a purchase ten years ago and a new mortgage a couple years ago are doing well, but for everyone in the market each locale is one unified market. 

[Ron Scott]

Measures of central tendency—mean, median, mode—can be misleading if not placed in context with measures of variance—like standard deviations—and, in real estate, without regard to differences among smaller areas within a RE market. The devil is in the details.

Defining COL by price per square foot of housing is inadequate as it obviously misses other living necessities (food?).

[wageslave23]

Easy. If you aren't sure if you live in a low cost or high cost area, then you live in a medium cost area.

[simonsez]

Easy. If you aren't sure if you live in a low cost or high cost area, then you live in a medium cost area.

Ha, easily the best answer!

[Catbert]

Median house price in San Diego is now just under $1 million.  SDGE has the highest electric rates in the country.  Cheapest gas according to GasBuddy is $4.99.  Average gas price is just under $6! 

You don't sound HCOL to me.

[August26th]

Thanks for all of the answers. Plenty of takeaways, but I think I now know I am not HCOL but rather M/H COL.

Very helpful, everyone! Thank you.