Despite a notable decline in overall inflation since the peak following the COVID-19 pandemic, the cost of living remains high across many U.S. regions, with significant disparities from state to state. This continues to pose challenges for both residents and businesses looking to attract talent in financially sustainable areas. Due to this, cost of living is among the ten critical criteria in CNBC's annual ranking of the best states for business. In the 2025 edition, it accounted for 2.4% of the total score, evaluated using data from the Council for Community and Economic Research (C2ER). This index considers average prices of goods and services, housing affordability, and homeowners' insurance costs—particularly significant amidst the nation's insurance crisis.
While some states are experiencing moderate inflation, others continue to see high price levels that directly impact their residents.
California: Leading the Pack in High Costs
California tops the list as the most expensive state to reside in for 2025, scoring a mere 6 out of 60 possible points in the cost of living category, equating to a failing grade. Nearly 40% of Californians spend more than a third of their income on housing—the highest rate nationwide. In cities like San José, average home prices reach $1.86 million, with Orange County not far behind at $1.48 million.
The situation has been exacerbated by January's wildfires in Southern California, leading to a steep rise in insurance premiums. State Farm has been approved for a 17% rate increase and seeks an additional 13% hike. Homeowners' insurance in California now averages $2,930 annually. Other basic costs are also steep: a dozen eggs average $2.96, and monthly energy bills exceed $250.56.
Florida: Sunshine State with Soaring Costs
Despite its sunny reputation, Florida ranks third among the priciest states to live in by 2025, heavily impacted by a severe housing insurance crisis and an increasingly inaccessible real estate market. Frequent storms and legal restrictions on suing insurers have created what experts call the worst insurance crisis in the nation.
Even after Governor Ron DeSantis implemented reforms in 2022 and 2023, aimed at stabilizing the market, Floridians continue to pay the highest insurance premiums nationwide. The average annual homeowners' insurance is $15,460, and the average home price in Miami-Dade County is now $711,025. Over 36% of residents spend more than a third of their income on housing, a proportion surpassed only by Hawaii and California.
Basic costs also remain high: a dozen eggs cost $3.77, and monthly energy bills are over $220. Florida earned an F rating with only 10 out of 60 possible points in the cost of living category, and recorded a regional Consumer Price Index (CPI) increase of 2% in May.
The state does not rank among the happiest, although it does make it into the top 20. A study by Florida Politics in June, based on research from Topture evaluating 21 well-being indicators, placed it 17th in the national happiness ranking. The study highlights that happiness depends on personal, social, economic, and environmental factors, often shaped by public policy. "States investing in public health, economic equity, and environmental resilience are seeing real emotional and social benefits," noted Jamie Lantz, Topture's lead analyst.
The Top 12 Most Expensive States in 2025
Along with California, CNBC's ranking reveals several other states facing high living costs, making them top contenders on the national list:
- California
- Hawaii
- Florida
- Colorado
- Oregon
- New York
- Massachusetts
- Maryland
- Washington
- Texas
- Louisiana
- Arizona
Each of these states presents a combination of high prices in housing, essential goods, and insurance, marking them as the most costly places to live in the U.S. by 2025.
Economic and Business Implications
For companies considering expansion or relocation, a state's cost of living has become a crucial factor in evaluating its competitiveness. High living costs can hinder talent attraction and increase operational expenses. As the Federal Reserve continues to monitor inflationary trends and debates over new tariffs impact the economy, CNBC's report makes it clear that post-pandemic inflation still leaves its mark in various regions, making life in certain states a luxury many cannot afford.
Understanding the Cost of Living in the U.S. in 2025
Why is California the most expensive state to live in?
California's high cost of living is due to exorbitant housing prices, increased insurance premiums following natural disasters, and high prices for basic goods and services.
What factors contribute to Florida's high living costs?
Florida's living expenses are driven by a severe housing insurance crisis, frequent storms, high property and insurance costs, and increased prices for everyday essentials.
How do high living costs affect businesses?
High living costs can make it difficult for businesses to attract talent and increase operational costs, impacting their competitiveness and expansion plans.