Real estate experts have revealed the states where Americans should avoid buying property in the next five years.
While some states may have beautiful scenery, vibrant cities or a strong job market, other factors may make them an unwise destination for prospective homebuyers.
Escalating insurance costs could be a problem in some states, while buying a home in others may simply be unaffordable for most Americans.
Whether you are saving to buy a house or waiting for mortgage rates to fall, researching the market now can help you decide where to invest in the future, said real estate agent Yawar Charlie.
‘While no one can predict the market with absolute certainty, the patterns we’re seeing now offer some valuable clues,’ the director of the estate division at Aaron Kirman Group in Los Angeles told GoBankingRates.
Experts warned against buying in California due to sky-high property prices
The first state that experts highlighted is California.
Los Angeles-based broker Charlie, who also stars in CNBC’s Listing Impossible, said affordability is a key issue.
The average California home value is $786,938, according to Zillow, compared to a nationwide average of $360,681.
‘The tech boom, especially in areas like the Bay Area, has driven housing prices to astronomical levels, pushing many to seek refuge in more affordable states,’ he said.
‘And it’s not just the high cost of living here that’s a problem,’ he added.
‘The state also struggles with issues like wildfires and droughts, which can make homeownership even more challenging and expensive.’
The intensifying risk of climate disasters in the state has meant that a growing list of insurance companies have limited or even stopped doing business entirely in the Golden State – pushing up the price of customer premiums.
Rachel Stringer, a realtor at North-Carolina based Raleigh Realty, told the outlet: ‘Demand continues to outpace supply in California, keeping inventory tight.
‘This supply crunch, coupled with slow wage growth, raises affordability concerns over time. As costs rise faster than incomes, keeping up with mortgage payments could become increasingly difficult.’
Florida is the second state the real estate agents highlighted – largely due to the impact of extreme weather.
‘The state’s location makes it extremely vulnerable to hurricanes and rising sea levels driven by climate change,’ Stringer said.
‘Serious considerations include rebuilding costs, disruptions and escalating insurance premiums due to storm damage. Coastal properties may lose substantial value if they become uninhabitable due to rising sea levels.’
Homeowners in Florida already pay the highest premiums for coverage in the US, at an average of $10,996 a year in 2023, according to Insurify.
And projections from the insurance comparison company say this will increase a further 7 percent this year, hiking the typical premium in the state to a staggering $11,759.
Experts also warned against buying property in Illinois over the next five years.
Illinois, and Chicago specifically, is facing significant financial woes, Charlie said.
‘The state has some of the highest property taxes in the country, and Chicago is grappling with a high crime rate and budget deficits, leading to cuts in essential services and increased taxes.
‘These financial strains make it difficult for residents to justify staying when they could find a safer and more financially stable environment elsewhere.’
Tony Mariotti, founder of luxury real estate company RubyHome, told GoBankingRates that Americans also might want to rethink making real estate investments in Louisiana.
He also pointed to climate change and high costs of home insurance as one of the key issues.
‘Louisiana is highly susceptible to climate change impacts, such as hurricanes and flooding. These risks can lead to higher insurance costs and potential property damage,’ he said.
While the state is famous for its rich culture and history and delicious food, he pointed to other issues which could be a deterrent for prospective homebuyers.
‘The state also struggles with lower job growth and economic diversification, making it less attractive for long-term investments. Infrastructure issues add to the challenges of property ownership here,’ Mariotti said.
Experts also flagged New Jersey as a state to steer clear of when buying property.
‘Besides the high property taxes, New Jersey is dealing with an exodus of major corporations, which impacts job availability,’ Charlie explained.
‘The state also has some of the highest health insurance premiums in the country, adding another layer of financial stress for residents.
He also added that congestion and traffic, especially for anyone commuting into New York City, can be a daily frustration for residents.
Charlie also warned buyers from looking for property in Jersey’s infamously expensive neighbor state – New York.
Experts also warned against buying property in Illinois over the next five years
‘Besides the high property taxes, New Jersey is dealing with an exodus of major corporations, which impacts job availability,’ Charlie said
When it comes to New York City, he warned that there is an issue of ageing infrastructure – alongside a soaring cost of living and high property taxes.
‘The subway system, for example, has been notorious for delays and breakdowns, making daily commutes a headache.
‘Plus, the pandemic has shifted many jobs to remote work, reducing the need to live in or near the city and prompting many to relocate to suburban or even rural areas.’
Stringer, from Raleigh Realty, also flagged West Virginia as among the worst states to invest in property over the next five years.
She noted that the declining coal industry in the state has ‘economically devastated’ many parts.
‘As jobs dry up, the population drains in these small towns, leaving little demand for housing. Homeowners may struggle to find buyers willing to pay a fair price,’ she said.
