Real estate investors have always valued property in the South. The appeal is clear when you consider the vast amounts of open space, warm weather and beautiful scenery in many Southern cities. But when it comes to making the best investments, not every city is created equal. In fact, some places should just be avoided entirely.
GOBankingRates spoke to real estate investors about where they’re avoiding investing in the South. Here’s what they said.
Also here are 34 Southern cities where home prices are projected to spike in 2025.
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New Orleans’ Hurricane Risks Outweigh Rewards
The charm of New Orleans’ rich culture and history is undeniable. But if you’re investing in real estate here, you can’t afford to ignore the risk of hurricanes.
“New Orleans’ vulnerability to natural disasters and economic volatility dampens its appeal for multifamily investment,” said Graham Sowden, Chief Investment Officer (CIO) at RREAF Holdings, a firm that has overseen over $4 billion in multifamily transactions across the South.
Stephen Kovach, CEO at Global Advisers, said that New Orleans can be challenging because “post-pandemic recovery has been slower compared to other southern cities, impacting economic stability.”
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Shreveport’s Declining Population Is a Concern
“Economic stagnation and population decline pose challenges for multifamily investment in Shreveport,” Sowden said.
If you’re considering investing in real estate, few factors are as critical as the city’s population growth. If the populace shrinks, that means declining demand for housing and commercial properties.
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Louisiana and Oklahoma’s Weak In-Migration
Arvind Cheruku, partner and CIO at Fulshear Central, warns against investing in Louisiana and Oklahoma altogether. “There aren’t many people moving into these states from California or Illinois or New York,” he said.
Cheruku also said that these states’ business environments “may not be conducive to investment growth.” Because of the harsh operating conditions, some investors are steering clear right now.
Austin’s Overheated Market
Even the booming capital of Texas gives Cheruku pause these days. “I would currently be very careful and opportunistic when investing in Austin,” he said.
Cheruku believes “some of the price appreciations have been unrealistic and out of touch with the market.” This is a sign that the value is probably artificially inflated, which makes him cautious.
Mobile and Montgomery’s Economic Headwinds
“Despite its strategic location, Mobile faces economic headwinds and demographic challenges that impact multifamily investment potential,” Swoden said.
Similarly, “Economic challenges and population trends impact multifamily investment prospects in Montgomery compared to other Southern markets,” he said.
Because of these reasons, the expert investors we spoke to are mainly avoiding these markets right now.
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Jackson and Meridian’s Struggles
Sowden pointed to Jackson and Meridian, Mississippi as two cities presenting challenges for multifamily investment.
“With economic struggles and population decline, Jackson presents challenges for multifamily investment in the Southern region,” he said.
Kovach said that Jackson is also an issue because of its inadequate infrastructure and dependence on the public sector: “The city’s economy is heavily reliant on public sector jobs, which limits growth opportunities in other sectors.”
Likewise, “Economic challenges and demographic trends hinder multifamily investment potential in Meridian,” he said.
Monroe’s Demographic Hurdles
Monroe, Louisiana is situated between Shreveport and Jackson, Mississippi, in what would seem to be the perfect spot. But Sowden said it still makes him hesitate.
“Despite its strategic location,” he said, “Monroe faces economic headwinds and demographic challenges that impact multifamily investment potential.”
Gulfport’s Stagnant Growth
Rounding out the list of cities to avoid, Sowden said that “Economic struggles and limited population growth pose challenges for multifamily investment in Gulfport, Mississippi.”
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Birmingham’s Slow Down
Kovach said that Birmingham has been “experiencing slower economic growth compared to other cities in the region. Challenges include a less diversified economy and lower levels of new business investment.”
He said that even though there have been some efforts to improve economic inclusion, “the pace of change may not be sufficient to drive significant investment returns in the short term.”
Avoid Potential Pitfalls
By following the advice of Sowden, Kovach and Cheruku, investors can avoid pitfalls in an already difficult market. Just remember you should always do your own research before making any large investments.
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Investor: 11 Southern Cities Where You Should Avoid Buying Property
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