Worst Places to Invest in Real Estate (in the Next 5 Years)

The post Worst Places to Invest in Real Estate (in the Next 5 Years) by Sarah Edwards appeared first on Benzinga. Visit Benzinga to get more great content like this.

Not every real estate investment can be a hit out of the park. Cities that are facing population decline, oversupply or economic risks tend to be the worst places to invest in real estate right now. 

The cyclical real estate market, once booming, is correcting, with some areas feeling the pain more than others. While opportunities remain, it helps to know the metros and regions where real estate investors might struggle to capture strong returns over the next five years.

Here are the cities to consider avoiding based on factors like job growth, migration trends, housing affordability and potential rental yields.

The Worst Places to Invest in Real Estate (2025–2030)

San Francisco, California

The City by the Bay’s fundamentals have foundered, with property values dropping more than 13% year over year and rents falling 8% to 10% since 2022. In recent years, more people have moved out of San Francisco than moved in. Huge job cuts in the technology sector have contributed to a drop in rental demand. 

The city’s real estate market is struggling under high taxes, strict regulations and one of the nation’s highest costs of living. Office vacancies and the waning appeal of major metros add to San Francisco’s position as one of the worst places to invest in real estate.

Detroit, Michigan 

Despite a slight increase in the Detroit metropolitan area in 2025 — its first in 15 years — the population of Motor City proper continues to decline. Housing is cheap with a median home price between $80,000 and $90,000, but that doesn’t necessarily translate into profitability. 

Rents of $1,100 to $1,200 that appear to provide double-digit returns can be eaten away by high rates of tenant defaults, expensive evictions and costly repairs to homes that average 80 years old, resulting in low ROI.

New Orleans, Louisiana

The extreme environmental risks faced by New Orleans make it one of the worst real estate markets in the nation. Nearly 100% of the houses in the Big Easy are at risk of flooding in the next 30 years, according to First Street, which provides climate risk data. 

As a result, home insurance premiums have surged more than 60% since 2024. All that wrapped in with hurricane risks and a stagnant job market has led to a decline in property values.

Baltimore, Maryland

One analysis of Baltimore called the city a graveyard for capital. Homes bought in revitalization zones in 2021 for $180,000 are now selling for $160,000. The city’s violent crime is three times the national average, at a reported rate of 1,900 per 100,000 residents, which adds its reputation as one of the nation’s housing markets to avoid.

Parts of Baltimore have a vacancy rate above 20%, insurance rates have jumped 15% in two years and property taxes are high at $2,600 per year on a $220,000 home. Around 15% of homes sit vacant, which is twice the average rate in the nation’s largest metropolitan areas. 

Punta Gorda, Florida

For some analysts, Florida is on a crash watch. In Punta Gorda, specifically, home prices have slumped 13% in the last year alone, with one real estate professional putting the decrease closer to 16%. 

Several issues are overwhelming the Florida housing market for investors: overbuilding and oversupply, state-mandated special assessments that have sunk the condominium market, and the rising cost of insurance premiums — if insurance is even available. 

Major insurers have exited Florida, and homeowners in Punta Gorda can pay more than $7,200 per year. This doesn’t include an additional $1,500 to $2,000 for flood insurance for many homes.

Houston, Texas

Rising overall costs, an oversupply of houses, and layoffs in the oil and gas industry are draining the once-powerful rental investment market in the energy capital. After a building craze boosted supply by 25%, homes in Houston now sit empty while thousands of energy industry job cuts have left its downtown with a vacancy rate approaching 30%.

Higher mortgage rates have pushed average monthly payments to $2,250 in a city where the average rent for a three-bedroom home is $1,950. Texas has no state income tax, but property taxes on a $340,000 home can run $6,800 per year. Home insurance against wind, hail and flood damage can tack on another $4,500 annually. 

Fort Myers, Florida

With foreclosures hitting 18% this year, real estate watchers in Fort Myers fear a possible repeat of the housing market crash of 2008. This is among the housing markets to avoid because the city has not escaped Florida’s property insurance crisis, with homeowners paying annual premiums between $5,800 and $7,500.

Median prices have dropped 12%, from $420,000 to $370,000, and home inventory is up almost 30%. At the same time, interest rates are pushing affordability out of the reach of residents, who earn a median income of $70,000. 

Carlsbad, California

As a beach city, Carlsbad once presented a great real estate opportunity. However, escalating costs may make the seaside community north of San Diego too much of a challenge for investors. 

The median home price is $1.27 million in a city with a median income of $115,000. At a 7% interest rate, an average monthly mortgage would be $7,500, more than twice the average monthly rent in Carlsbad. 

Competition from hotels and state-level regulations have slashed vacation rental income. Finally, property taxes on a million-dollar home cost $12,500 annually, and insurance premiums cost more than $6,000 per year.  

How to Identify Declining Real Estate Markets Before You Buy

• Watch for a declining population and high net out-migration.
• Note consistently high or rising vacancy rates.
• Review local data on job and income growth.
• Track the number of days homes stay on the market.
• Look for increasing inventory levels.
• Check property tax and insurance cost trends.
• Use Redfin, Zillow, government data and other reliable sources.

Where Risk Meets Reality in Real Estate

Over the next five years, markets that experience unsustainable price increases, poor job diversification and multiple climate-driven events may see the weakest financial returns, making them the worst places to invest in real estate. 

These declining housing markets can present challenges as well as opportunities, requiring you to conduct market-specific research and focus on the fundamentals of long-term investing instead of chasing short-term hype.

Frequently Asked Questions

Real estate markets are continuously evolving, so base your decision on solid research into the local market.

The post Worst Places to Invest in Real Estate (in the Next 5 Years) by Sarah Edwards appeared first on Benzinga. Visit Benzinga to get more great content like this.