Over a decade ago, I wrote a post ranking major Metro Areas by cost effectiveness. Both median income and cost of living vary by city – an easy metric on cost effectiveness can be derived by simply dividing income by a measure of costs. I decided to reprise this study, but after finding the original data sources unavailable, chose to construct a new measure using median income divided by home price index for each metro [1].

Why home prices? As home prices have risen across many metropolitan areas in the US, housing costs are eating a larger share of Household income than measured by CPI or many cost-of-living-indices. In addition, home prices (and the rents they imply) have proven to be a key impediment to household formation in expensive areas – witness the outflows from California now that the pandemic has severed the ties between location and employment!

I used Census Bureau data on household income for the top 25 metro areas in the US, divided by the Freddie Mac home price index for each (this index is available for every MSA in the US, unlike the more popular Case Shiller index).

Chicago tops the list in this analysis, driven by above-average median income coupled with the lowest home prices in the top 10 US metro areas. While Detroit is next (another vote for low home prices), it’s followed by San Francisco, Minneapolis, and Boston, all metro areas where above-average income offsets higher home prices. At the other extreme, Miami keeps its spot at the bottom, with high home prices and low median incomes. The bottom five is rounded out by Tampa, Los Angeles, San Antonio, and Orlando.

Clearly your mileage WILL vary [2] – while homes are cheaper off the coasts, it’s not yet clear if 100% remote work will continue to be possible for those who are able to take advantage today. Nor does this analysis account for income inequality within cities, as your income in city X might vary substantially more than in the relative comparisons below. Nonetheless, if you can tolerate the weather, it seems that Chicago and Detroit want folks back, and if need to be in the Sun Belt, Atlanta is the top option. If you need a beach, you’ve got to head down the list, where San Diego is the best bet.

[1] This is an overly simplistic measure to be sure – in reality you’d want to consider the net disposable income per household after factoring in wages, federal/state/local taxes, home prices, and other expenses, as adjusted by metro. In the pandemic world, perhaps it’s possible to take your job anywhere, in which only cost factors are impactful – but in the long run, it’s likely that local salaries will matter, whether because employers bring employees back to the office or because they begin to adjust salaries by location.

[2] NerdWallet, Best Places and others offer more detailed city vs city calculators, some of which enable tweaking of personal circumstances as well.