Used-car prices slip from dizzy heights in small victory for consumers
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Finding the right place to live where your dollar goes furthest can mean the difference between scraping by or being able to enjoy the fruits of your labor.
The length of a commute, how much fuel costs, and the price of groceries are just some of the ways to judge how far that dollar will stretch. And the cost of buying or renting a home is paramount. Job opportunities matter, as well: Many of the most economical places to live are those that have successfully lured and nurtured vibrant young startups and tech businesses.
The COVID-19 pandemic changed nearly every aspect of our lives, including where we choose to live. The option of remote work has expanded job horizons, putting into play many places that once were out of the question entirely. Some cities like Tulsa, Oklahoma, are even offering lucrative cash incentives to draw remote workers.
To find the cities where your dollar goes the furthest, Assemble analyzed the Bureau of Economic Analysis’s 2019 Regional Price Parity (RPP) index, released in December 2020. The Regional Price Parity index measures the differences in price levels across metropolitan areas for a given year, expressed as a percentage of the overall national price level. For this ranking, Assemble ranked metropolitan areas by the “all items RPP,” which covers all consumption goods and services, including housing rents.
Income data was also found via another 2019 Bureau of Economic Analysis dataset. The RPP adjusted per capita income is calculated by finding the per capita income if the metropolitan area’s prices were at the national price level. Ties in RPP were broken by the metropolitan area with the higher RPP adjusted per capita income. Metropolitan areas with fewer than 500,000 residents were filtered out of this analysis.
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- Regional Price Parity: 89
--- Per capita income: $38,204
--- RPP Adjusted per capita income: $42,926
--- Population: 526,719
The cost of living is low in Fayetteville, at 16.4% less than the national average. Commutes are short, averaging a mere 22 minutes, and North Carolina’s state income tax is low at 5.25%. One big draw to Fayetteville is Fort Bragg, the nation’s biggest U.S. Army base by population with more than half a million active-duty soldiers as well as more than 120,000 retirees and family members. The military base itself has nearly three dozen restaurants, 11 churches, and two golf courses.
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- Regional Price Parity: 89
--- Per capita income: $47,376
--- RPP Adjusted per capita income: $53,231
--- Population: 565,194
Southeastern Tennessee’s Chattanooga invested $120 million in a revitalization of its riverfront that was finished in 2005, and it was the first city in the nation to build a citywide gigabyte network that provides inexpensive and lightning-fast internet access. Combined with efforts by local government and businesses, its tech infrastructure has made Chattanooga a growing home to entrepreneurs, startups, and tech companies. The city’s downtown is spirited, with small businesses and residential life, and the art scene is lively and growing.
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- Regional Price Parity: 88.7
--- Per capita income: $45,904
--- RPP Adjusted per capita income: $51,752
--- Population: 676,008
Located between North Carolina’s mountains in one direction and its scenic ocean beaches in the other, Winston-Salem draws a sizable crowd of people to attend its schools. The area is home to top-ranked public and private institutions including Wake Forest University, Salem College, Winston-Salem State University, and the University of North Carolina School of the Arts. The city’s cost of living comes in at 32% less than the national average, grocery prices also are relatively low, and it’s ranked in the state as the cheapest locale for retirees by Uphomes.
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- Regional Price Parity: 88.6
--- Per capita income: $56,540
--- RPP Adjusted per capita income: $63,815
--- Population: 998,626
The Tulsa Remote program offers $10,000 to adult applicants willing to move to the northeastern Oklahoma city in the next year for 12 consecutive months. The program requires applicants have full-time remote employment or be self-employed outside of the state. At $157,200, the median home price in Tulsa is 43% below the national average. The city has a thriving arts district as well as urban parkland, green spaces, and a new 66-acre riverfront park called the Gathering Place.
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- Regional Price Parity: 88.4
--- Per capita income: $47,550
--- RPP Adjusted per capita income: $53,790
--- Population: 869,046
Situated on the banks of the Tennessee River, Knoxville is just a stone’s throw from the Great Smoky Mountains National Park, the nation’s most popular national preserve, according to National Parks System data. The Knoxville area is home to 23 institutions of higher learning, including the main campus of the University of Tennessee. Costs are low for housing, utilities, and health care, and the average property tax rate is about 0.7%, well below the national average of more than 1.2%.
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- Regional Price Parity: 88.3
--- Per capita income: $53,374
--- RPP Adjusted per capita income: $60,446
--- Population: 1,090,435
Birmingham was once a steel-forging center, and it is rich in civil rights history. More recently, the city has invested in neighborhood revitalization, and one of its newest attractions is a fresh produce market downtown.
In June 2020, Landing, a company that runs a nationwide membership-based network of furnished apartments, announced it was moving its headquarters to Birmingham from San Francisco. The move will bring 816 new full-time jobs. The city and state governments have designed incentive packages to attract businesses, and officials expect moves like Landing’s to bring in more companies, especially tech-based groups, in its wake. PNC Bank also recently said it would establish a Birmingham Technology Center to build up its presence in the area.
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- Regional Price Parity: 88.2
--- Per capita income: $67,771
--- RPP Adjusted per capita income: $76,838
--- Population: 534,904
The Northwest Arkansas Council, which covers the cities of Fayetteville, Springdale, and Rogers has invested more than $1 million to attract talented workers to the region. With the support of the Walton Family Foundation, the Life Works Here initiative offers $10,000 cash grants—and a bicycle—as incentives to move to the region. The plan was to help fill more than 10,000 job openings, targeting remote workers, especially in science, technology, engineering, arts, and mathematics (STEAM) jobs. The region boasts seven times the national average of headquarters and management employees and along with being home to Fortune 500 companies, it wins high marks for its support and climate for minority entrepreneurs.
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- Regional Price Parity: 87.9
--- Per capita income: $52,129
--- RPP Adjusted per capita income: $59,305
--- Population: 640,218
Wichita is a five-county metropolitan area, where about half the population lives within the city’s official limits. Rent and urban congestion are both low. The average one-way commute of about 19 minutes is about a quarter of the nationwide average. The city is a center for top health care, with specialty clinics and hospitals that specialize in stroke, cardiac and spinal care.
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- Regional Price Parity: 87.7
--- Per capita income: $37,633
--- RPP Adjusted per capita income: $42,911
--- Population: 844,124
El Paso has been recognized for having one of the lowest costs of living among U.S. cities, along with a low crime rate. The state of Texas has no income tax, and El Paso offers a First Time Homebuyer program with loans at interest rates from 0% to 3% as well as principal reduction subsidies and forgivable loans for down payments and closing costs.
Not only do dozens of Fortune 500 businesses have offices in El Paso, but the city is home to the U.S. Army’s Tank Division at Fort Bliss, the William Beaumont Army Medical Center, and the University of Texas at El Paso. The local economy has struggled as trade traffic on international bridges to Mexico is operating at less than a third of pre-pandemic levels.
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- Regional Price Parity: 87.7
--- Per capita income: $44,734
--- RPP Adjusted per capita income: $51,008
--- Population: 594,806
Mississippi’s capital city of Jackson has had a consistent and diverse job market, with employment opportunities with the state government, hospital systems, manufacturing hubs, and aerospace and telecommunications companies. The area has two historically Black colleges—Jackson State University and Tougaloo College—as well as Millsaps College, Belhaven University, the University of Mississippi Medical Center, and community colleges. The nearby 3,000-acre Barnett Reservoir provides the area’s water supply as well as outdoor recreation options.
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- Regional Price Parity: 87.7
--- Per capita income: $46,560
--- RPP Adjusted per capita income: $53,090
--- Population: 742,384
The cost of living in Little Rock is low—for added perspective, it is more than 40% less than in New York City, according to local statistics. The median sale price of a home is $131,837, less than half of the national median. With mortgage rates below 3%, the average homeowner in Arkansas who put 20% down pays a monthly sum of principal and interest amounting to just $445. The local costs of health care, food, and utilities also fall below national averages.
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- Regional Price Parity: 87.6
--- Per capita income: $49,161
--- RPP Adjusted per capita income: $56,120
--- Population: 807,611
The densely urban city of Dayton gets high ranks for livability and for its cost of living, with the average prices of housing, groceries, transportation, and groceries on the low side. A major source of employment is the Wright-Patterson Air Force Base, along with government-funded research installations like the Air Force Research Laboratory. The city struggles with high crime and poverty rates, however.
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- Regional Price Parity: 86.2
--- Per capita income: $48,330
--- RPP Adjusted per capita income: $56,067
--- Population: 641,816
At one time an industrial powerhouse fueled by manufacturing for the automotive and glass industries, Toledo in contemporary times has more jobs in health care, energy, education, and green startups. The city enjoys a low cost of living, and it is conveniently located near Detroit and Chicago. But its overall wages tend to be low, and its poverty rate is higher than in the rest of the state. Its property and sales taxes are on average with the rest of Ohio, although the income tax for those who live or work in Toledo is 2.5%.
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- Regional Price Parity: 85.1
--- Per capita income: $43,167
--- RPP Adjusted per capita income: $50,725
--- Population: 536,081
Youngstown is an affordable metro area, with a low cost of living and reasonable housing costs. As manufacturing opportunities have fallen off, more jobs have arisen in education at Youngstown State University and in the Mercy Health and Steward Health Care medical systems. The Youngstown Business Incubator helps encourage growth, startups, and entrepreneurship in the tech sector. Youngstown also has nurtured a cultural and economic renaissance with efforts to revitalize its downtown and various urban neighborhoods.
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- Regional Price Parity: 82.2
--- Per capita income: $27,415
--- RPP Adjusted per capita income: $33,352
--- Population: 868,707
The border towns of McAllen, Edinburg, and Mission draw crowds of Texans each winter who seek out its mild seasons and help buoy the region’s economy. People who live in the border region spend far less than the national average on their housing, transportation, food, and health care. The local population tends to be young, bilingual, and bicultural thanks to the region’s proximity and close ties to Mexico. The area’s low crime rates and cost of living have attracted new residents, and more than 100 Fortune 500 companies have some sort of local operation underway.
This story was produced and distributed in partnership with Stacker Studio.
DEARBORN, Mich. (AP) — For months, anyone who wandered onto a dealer lot to look for a used car could be forgiven for doing a double take — and then wandering right off the lot.
Prices had rocketed more than 40% from their levels just before the viral pandemic struck, to an average of nearly $25,000. The supply of vehicles had shrunk. And any hope of negotiating on price? Good luck with that.
But now, a sliver of hope has emerged. The seemingly endless streak of skyrocketing used-vehicle prices appears to be coming to a close.
Keep scrolling to find out the cities where your dollar goes the furthest.
Not that anyone should expect bargains. Though average wholesale prices that dealers pay are gradually dropping, they’ll likely remain near record levels. So will the retail prices for consumers. Supply remains tight. And while demand has eased a bit, a steady flow of buyers could keep prices unusually high for a couple of years more.
“It’s a short-term correction,” suggested Paul Sugars, sales manager for pre-owned vehicles at Jack Demmer Lincoln in Dearborn, Michigan. “Buyers are sitting on the fence, waiting to see what happens.”
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Sugars should know. As internet and foot traffic at his dealership fell in the past few weeks, he began to cut prices on some of the 70 used vehicles on his lot. Now, he says, buyers are starting to return.
One of them is Jessica Pitts of Detroit, who began shopping for a used vehicle last year after her car broke down. But as prices roared ever higher, Pitts delayed her purchase. Recently, though, after Sugars cut the price of a red Lincoln MKC she had been watching, Pitts took notice.
“That’s what brought it back to my attention,” she said. “The price had come down a little.”
The red compact SUV, with 58,000 miles on it, cost Pitts roughly $27,500, down just a little from $28,000.
The return of buyers like Pitts has led experts to suggest that demand will be high enough to keep used-vehicle prices from falling significantly. One reason is that supply is still low. According to Cox Automotive, dealers last month had only enough vehicles to meet demand for 34 days — 11 days fewer than in the same month in 2019, the last year that was considered normal for used vehicle sales.
Few think the slight easing of used-car prices heralds any slowdown or reversal in overall inflation across the economy. With the notable exception of lumber prices, which initially skyrocketed only to fall back to earth, many goods, components and services — from semiconductors and gasoline to clothing, restaurant meals and household furnishings — have grown increasingly expensive. So have labor costs, as worker shortages in many industries have led employers to raise pay.
Still, the Federal Reserve under Chair Jerome Powell foresees inflation eventually easing after supply shortages are resolved. Bond investors appear to agree. The yield on the benchmark 10-year Treasury note, which generally reflects the outlook for inflation, has declined in recent weeks in a sign that investors remain more concerned about the prospect of an economic slowdown than about surging inflation.
Until the pandemic flattened the economy in March 2020 and shrank the supply of both new and used vehicles, average wholesale used vehicle prices paid by dealers rose only a little every year. Average prices briefly fell in April last year, only to soar over 60% to a peak in May this year, according to data kept by Manheim, a group of auction houses where dealers buy vehicles.
Any decline, however slight, would represent welcome relief for buyers. In June, the average retail list price of a used vehicle was just short of $25,000, a record. Prices rose so high that some 2-year-old used vehicles were, counter-intuitively, selling for more than the sticker price when they were new.
Low-income buyers have been especially hurt. Anyone who was compelled to buy a used car to commute to work was often limited to vehicles with 100,000 miles or more. Yet the average price of even those vehicles jumped 31% in the past year — to $16,489 — according to Edmunds.com. Buying a car — any car — became out of reach for many.
Some of the price increases were fueled by government stimulus payments that arrived in March, when a qualifying family of four could receive $5,600. Retail prices for used vehicles surged so high that in April, May and June, they accounted for about one-third of the entire increase in the U.S. consumer price index. In June, used prices rose a record 10.5%, helping to drive inflation to 5.4% compared with the same month a year earlier. That was the highest such increase since 2008.
By late June and into July, used-vehicle shoppers had seen enough. Many decided to wait for the craziness to end, and their pullback caused wholesale prices to decline slightly. Dealers feared they had paid too much for vehicles on their lots. Some started cutting prices.
“The frenzy is over, so inventory is starting to build a little bit,” said Michelle Krebs, an analyst for Cox Automotive. “Typically, used-vehicle prices drop after tax refunds, stimulus checks.”
Alex Yurchenko, senior vice president of data for Black Book, which monitors vehicle costs, expects prices to decline a bit more but to remain well above 2019 levels for a couple more years. Eventually, he suggests, prices will fall further as supply catches up to demand.
Jonathan Smoke, chief economist of Cox Automotive, cautions against expecting a drop back to pre-pandemic used-car prices.
“That,” he said, “would require a major decline in demand and a simultaneous expansion in supply. Neither are likely to happen.”
The whole crazy price cycle began with the eruption of the pandemic, when many states issued stay-at-home orders. Prices plummeted, and automakers shuttered factories for eight weeks. The resulting decline in supply came just as many cooped-up consumers wanted a new or used vehicle to commute to work or to take road trips without coming in contact with others.
While the auto plants were shut down in April and May last year, computer chip makers shifted production to satisfy wild demand for laptops, gaming devices and tablets. That created a shortage of automotive-grade chips, which remains an acute problem that might not be resolved until next year.
With new-car inventory slipping and demand high, the resulting jump in prices for new vehicles sent many buyers into the used market. Their demand reduced supply and drove up used-vehicle prices, too.
Some new-vehicle dealers have run out of best-selling models of pickup trucks and large SUVs. For some models, there are only enough vehicles on dealer lots to satisfy eight days of consumer demand. Manufacturers prefer to keep 60 days on hand to provide a good selection.
Ernie Garcia, CEO of used vehicle upstart Carvana, said too many variables make it impossible to predict where used-vehicle prices will go from here. They could fall if the chip shortage and other supply-chain bottlenecks are resolved and new-vehicle prices ease. But they could shoot back up, too, under certain circumstances.
“It’ll be hard for car prices to return all the way to normal until we have normalization in the supply chain of auto manufacturers,” Garcia said.
Everyone who predicted auto prices over the past year, he said, “has been wrong in pretty short order.”
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