Real estate experts have revealed the states where Americans should avoid purchasing property in the next five years.
While some states may have beautiful landscapes, vibrant cities, or a strong job market, other factors can make them an unwise destination for potential home buyers.
Rising insurance costs could be a problem in some states, while buying a home in others may simply be unaffordable for most Americans.
Whether you’re saving to buy a home or waiting for mortgage rates to drop, 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 are seeing now offer some valuable clues,” said the director of the real estate division of Aaron Kirman Group in Los Angeles. GoBankingFees.
Experts warn 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 on CNBC’s Listing Impossible, said affordability is a key issue.
The median home value in California is $786,938, according to Zillow, compared to a national 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 the problem is not just the high cost of living here,” he added.
“The state is also struggling with issues like wildfires and droughts, which can make homeownership even more difficult and expensive.”
Intensifying climate disaster risk in the state has meant that a growing list of insurance companies have limited or even stopped operating altogether in the Golden State, driving up the price of customers’ premiums.
Rachel Stringer, a real estate agent with North Carolina-based Raleigh Realty, told the outlet, “Demand continues to outpace supply in California, keeping inventory tight.”
‘This supply crisis, coupled with slow wage growth, raises concerns about affordability over time. As costs rise faster than income, keeping up with your mortgage payments could become increasingly difficult.’
Florida is the second state highlighted by real estate agents, largely due to the impact of extreme weather.
“The state’s location makes it extremely vulnerable to hurricanes and sea level rise driven by climate change,” Stringer said.
‘Serious considerations include rebuilding costs, disruptions and increased insurance premiums due to storm damage. Coastal properties may lose substantial value if they become uninhabitable due to sea level rise.’
Florida homeowners already pay the highest coverage premiums in the U.S., averaging $10,996 a year in 2023, according to ensure.
And insurance comparison company projections say this will rise another 7 per cent this year, raising the typical premium in the state to a staggering $11,759.
Experts also warned against purchasing property in Illinois over the next five years.
Illinois, and Chicago specifically, faces significant financial problems, 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 shortfalls, leading to cuts to essential services and increased taxes.
“These financial strains make it difficult for residents to justify their stay when they could find a safer, more financially stable environment elsewhere.”
Tony Mariotti, founder of luxury real estate company RubyHome, told GoBankingRates that Americans might also want to rethink making real estate investments in Louisiana.
He also pointed to climate change and the high costs of home insurance as one of the key issues.
‘Louisiana is very susceptible to the impacts of climate change, such as hurricanes and flooding. “These risks can lead to higher insurance costs and possible property damage,” he stated.
While the state is famous for its rich culture and history and delicious food, he pointed out other issues that could deter potential home buyers.
‘The state is also struggling with slower job growth and economic diversification, making it less attractive for long-term investment. “Infrastructure issues add to the challenges of real estate here,” Mariotti said.
Experts also singled out New Jersey as a state to avoid when purchasing property.
“In addition to high property taxes, New Jersey is facing an exodus of large corporations, which affects 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 traveling to New York City, can be a daily frustration for residents.
Charlie also warned buyers not to look at properties in Jersey’s infamously expensive neighboring state of New York.
Experts have warned against buying property in climate disaster-prone states like Florida (pictured: destruction left behind by Hurricane Ian in Florida in 2022)
Experts also warned against purchasing property in Illinois over the next five years.
“In addition to high property taxes, New Jersey is facing an exodus of large corporations, which affects job availability,” Charlie said.
When it comes to New York City, he warned that there is the problem of aging infrastructure, along with a rising cost of living and high property taxes.
‘The metro system, for example, has been characterized by delays and breakdowns, making daily travel a headache.
“In addition, the pandemic has shifted many jobs to remote work, reducing the need to live in or near the city and causing many to move to suburban or even rural areas.”
Stringer of Raleigh Realty also singled out West Virginia as one of the worst states to invest in property over the next five years.
He noted that the state’s declining coal industry has “economically devastated” many parts.
‘As jobs dry up, population dries up in these small towns, leaving little demand for housing. “Homeowners may have difficulty finding buyers willing to pay a fair price,” he said.