The state had the nation’s 10th-lowest prices, even as the Nashville metro area drove costs upward.
The rising costs of fuel, energy, food and housing have put the pinch on consumers across the country. However, even as the U.S. inflation rate surpassed 7% in 2021, prices in Tennessee are still well below national levels.
According to new regional data released by the Bureau of Economic Analysis, the state’s prices rank as the 10th lowest in the nation. Tennessee prices were rated as 90.9 on average, compared to the U.S. average of 100.
“The relative affordability of Tennessee has long been seen as part of the state’s desirability,” said Tim Kuhn, TNSDC director. “This data puts a finer point on that argument and shows that in most areas, Tennessee is among the most affordable states in the country.”
Four other southeastern states—Mississippi, Alabama, Kentucky and Arkansas—had the lowest overall prices. Primarily driven by the cost of housing, concentrations of higher prices were found on the west coast and in northeastern states.
Prices in Hawaii were 13.2 percent over the national average making it the country’s most expensive state.
Tennessee Affordability Cuts Across All Price Sectors
The BEA’s annual data are broken down into four categories, and TNSDC found that Tennessee saw below-average levels across all price sectors. The state’s consumer utility costs ranked fourth-lowest in the nation at 76% of the U.S. average. Rent prices for housing were at a similar level (76.4%) but ranked 32nd lowest in 2021.
The state’s prices for goods and other services were more than 5% below national levels, with both ranked 44th lowest in their respective categories.
|Price Category||Tennessee Price Level||State Rank|
The data also show that price differences for two categories—goods and other services—were comparable across states. On the other hand, rents and utilities had a much wider price range across the country.
For example, the lowest prices for goods were found in South Dakota where items cost 94 percent of the U.S. average. In Washington, the country’s most expensive state for goods, residents paid 11.5 percent over the national average for the same basket of goods. The 17.4-point range between the two states pales in comparison to the wide swath of rent and utility costs found across the country.
Washington D.C. rents, which were 75.4 percent over the national average, were more than three times that found in Mississippi where rent costs were 43.8 percent below average. The country’s second highest rents in 2021 were in California, which were 65 percent higher than the average rent.
Adjusted Tennessee Incomes Close the Gap on National Levels
Tennessee incomes lag national levels by several measures. For instance, the U.S. Census Bureau reported that the state’s median household income was $59,695 in 2021—14% under the U.S. median of nearly $70,000.
However, Tennesseans have a higher “purchasing power” once their incomes are adjusted for a lower cost of living in the state and paying less for goods and services. Tennessee’s price-adjusted median household income rose to $65,700, which was just $4,000 below the national median level in 2021. States bordering Tennessee, except for Virginia, saw their median household incomes grow by an average of $5,575 when purchasing power was factored in.
While this may come as good news to Tennessee residents, adjusting incomes for purchasing power only managed to move the state up one notch from 42nd to 41st in the nation’s household income rankings.
Rents in the Nashville Metro Drove Mid-State Prices Higher
Consumers in the 14-county Nashville metropolitan area experienced prices that were 5.3% higher than the state’s 90.9 average in 2021. This was the only region in Tennessee where prices exceed the state level, and rents in the mid-state accounted for nearly all the difference.
Housing rents in that area were 5% higher than the U.S. average in 2021. This is down slightly from 2020 and reverses a six-year trend that saw rents increase relative to the U.S. average price. In fact, Nashville’s 15-point increase since 2014 was the fifth largest among metropolitan areas with more than 1 million people. None of Tennessee’s other metro areas have seen price pressures similar to Nashville over that time.
“Across the state, we don’t’ find much variation in the price level of goods, services and utilities, but with rents we see something different,” Kuhn said. “Nashville and surrounding areas have had strong population growth. That creates new demand, which is at least partly responsible for rent hikes there. Through 2021, rents grew in other parts of the state, but their increase was on pace with the national average.”
|All Metropolitan Areas in Tennessee||92.1|
|Non-Metropolitan Counties in Tennessee||85.4|
About this data
BEA’s Regional Price Parity data show price levels of goods and services for the average consumer in one geographic area compared to all other regions in the United States. Price data are collected by federal statistical agencies and include the Consumer Price Index survey and the American Community Survey. Price levels for 2022 are scheduled for release in mid-December, 2023.