The United States is comprised of fifty states. Each state is governed by federal law as well as state laws. Every state in the US has economic challenges right now, and some have more than others. It is imperative for foreigners to understand that states that have the most issues right now are undergoing massive changes. Many states are losing population and jobs, and increasing income taxes, property taxes, homeowners insurance.
You see, the United States was first developed in the Northeast, Mid-Atlantic, and Midwest. These are areas that had the industrial revolution and they were the most populated areas of the country. Things have changed in the last thirty years. As a result of globalization, manufacturing jobs now only make up 9% of the US job market, compared to 53% in 1965.
These areas of industry are the areas that have older housing stock, high income taxes, and high real estate taxes. Thus, the population is declining as people and businesses move to tax-friendly states in warmer climates for job opportunities and quality of life.
These are areas to simply avoid for long-term real estate investments, as their court systems favor tenants, and properties will not go up in value anytime soon. States like New York, Pennsylvania, Michigan, Ohio, Indiana, and Illinois should be avoided for real estate investment. California is a state that has some of the highest property taxes and income taxes in the country. The state is $28 billion in debt and is projected to be $20 billion in debt for the next five years. Thus, they will be cutting services and raising fees of every kind to fill the gap in their budget.
Texas has a 3% real estate property tax, which destroys cash flow, and many parts of the state are in the hurricane zone, raising insurance rates. Florida is losing population and the cost of living has skyrocketed due to property taxes and homeowner’s insurance. My personal homeowner’s insurance in Tampa, Florida was increased from $1600 a year to $3500 a year.
Tennessee, particularly Memphis, has one major employer. Fed-Ex, with 30,000 employees, is struggling due to the decreased imports from China. This single industry could cripple the real estate values if Fed-Ex starts laying off.
North Carolina has a liberal government, which provides tenants with more rights than landlords. I have been on the losing end, trying to evict tenants in this state. The property taxes and the cost to record documents to transfer property in North Carolina are ridiculous.
Mississippi, Alabama, Arkansas, and Louisiana: forget about it! There is no industry or population trend to drive house values in these states.
And when was the last time you’ve ever heard of Missouri, Kansas, North Dakota, South Dakota, Iowa, Wyoming, Idaho, or New Mexico? There is no gold rush going on in these states, and house values will remain the same or slightly drop in the years ahead.
