As the housing market continues to evolve, prospective homebuyers are advised to carefully consider where they invest, given a range of economic and environmental factors impacting different regions. Experts have highlighted several states that may pose challenges for real estate investment over the next five years, based on current trends and future projections.
Yawar Charlie, estates director at Aaron Kirman Group and CNBC’s “Listing Impossible” cast member emphasises the importance of strategic decision-making amidst current market trends. He and other real estate professionals spoke with GOBankingRates to highlight states potentially less favorable for property investments by 2029.
1. California
California, renowned for its stunning landscapes and robust cultural scenes, faces formidable hurdles that could deter future homebuyers. "As a real estate broker in Los Angeles, I’ve observed trends suggesting declining attractiveness in certain states," notes Charlie. High living costs compounded by wildfire risks and drought challenges add financial strain, potentially discouraging prospective buyers.
Rachel Stringer, a Realtor at Raleigh Realty, underscores the issue of affordability: "Demand continues to outstrip supply, tightening inventory and escalating costs faster than wages. Sustaining mortgage payments might prove increasingly challenging."
2. Florida
While Florida's sunny allure appeals to retirees, its susceptibility to hurricanes and rising sea levels due to climate change poses significant risks. "Serious considerations include escalating insurance premiums and potential property devaluation from storm damage," explains Stringer. Coastal areas could see diminished property values if they become untenable due to environmental factors.
3. Illinois
Illinois, a manufacturing hub, confronts profound economic challenges, particularly in Chicago. Charlie highlights the state's high property taxes, crime rates, and budget deficits leading to service cuts and increased taxes. These financial strains may prompt residents to seek more stable environments elsewhere.
4. Louisiana
Louisiana's rich culture contrasts with its susceptibility to climate-related disasters such as hurricanes and flooding. Tony Mariotti, founder of RubyHome, points out that these risks elevate insurance costs and threaten property integrity, compounded by sluggish economic growth and infrastructure issues.
5. New Jersey
New Jersey contends with some of the nation's highest property taxes and health insurance premiums, exacerbating financial stress for residents. Charlie notes a corporate exodus impacting job availability and congested commuting conditions, adding to the state's less favourable investment outlook.
6. New York
In New York, beyond exorbitant living costs, ageing infrastructure—like the beleaguered subway system—poses daily challenges for commuters. Remote work trends spurred by the pandemic have altered housing demand, prompting migrations to suburban and rural locales.
7. West Virginia
West Virginia's economic reliance on declining industries, notably coal, has destabilised local economies and reduced housing demand. Stringer highlights the economic devastation in small towns, where homeowners face difficulties finding buyers willing to meet property valuations.
