Which States Are Good To Invest in Real Estate in Right Now?

The global real estate market is now valued at $3976.18 billion. It's expected to grow to $5209.84 billion in 2027. With this growth comes increased competition, making ideal opportunities for U.S. real estate investment much harder to come by. 

As we navigate today’s economic currents, it has become increasingly vital to identify areas known for stability and substantial return potential. In this guide, we list down the top five states that offer both simultaneously.  

These states have earned their place on our list for their excellent performance in various market aspects, such as growth, demand, affordability, and economic resilience. Each one presents a unique investment proposition, from burgeoning tech hubs to enthralling scenery ripe for development.

Whether you’re a veteran investor looking to diversify your portfolio or a newcomer seeking the right place to start, this article will provide valuable insights into the five leading destinations for real estate investments in the United States this year. 

Top 5 States for Real Estate Investments in 2023

Discover the top five states offering the most promising real estate investment opportunities this year. These states offer potential investors valuable insights as they consider where to make their next real estate moves.

1. South Carolina

South Carolina offers a compelling environment for real estate investments. The state’s picturesque coastal areas, historic charm, and pleasant climate make it a magnet for retirees, tourists, and families planning a move for a higher quality of life. Prosperous cities like Fort Mill and Greenville are experiencing steady economic growth, fueling property demand. 

South Carolina’s favorable property tax rates and low cost of living enhance its investment appeal. With a diverse real estate market, from beachfront condos to suburban homes, investors can find options that align with their goals. In essence, South Carolina presents a balanced blend of lifestyle appeal and investment potential.

The facts

South Carolina boasts a robust median home value of $204,820, making real estate quite affordable when compared to the national average. Furthermore, it has shown a remarkable propensity for appreciation. 

Over an eight-year period, the state’s median home value has surged by an impressive 43.2 percent. This impressive growth comes after the median home value hit its lowest point, plummeting to around $143,000 during the Great Recession’s last quarter in 2012.

Today’s median home value of $204,820 is a testament to the positive indicators that have buoyed the local real estate market for nearly a decade. Factors such as a strengthening economy, rising consumer confidence, a scarcity of available listings, and robust demand all have a role in the state achieving its highest-ever median home value.

2. Idaho

Idaho’s pristine landscapes, outdoor recreational opportunities, and low population density attract people seeking a quieter, more affordable lifestyle. Boise, the state’s capital, is experiencing rapid growth, propelling demand for housing and commercial properties. Idaho’s low property taxes and business-friendly policies make it an attractive option for investors. 

With a thriving tech industry, a strong job market, and a growing population, the Gem State presents ample potential for real estate appreciation. Investors looking for a mix of natural beauty and economic stability should consider Idaho as a prime destination for their investments.

The facts

The Idaho housing market is experiencing significant changes, with a 10.9 percent year-over-year decrease in the median sale price and a 27.2 percent decrease in the number of homes sold in April 2023. Mortgage rates have surged to a 20-year high at 6.79 percent, prompting sellers to reduce prices as homes linger on the market. This shift has given buyers more bargaining power. However, despite concerns about a potential housing market crash in Idaho, several factors suggest it’s unlikely.

Firstly, there is a low inventory, with only a 2.6-month supply available as of May 2023. This scarcity is driving up prices and indicates that a crash is unlikely in the near term. Additionally, the supply of newly constructed homes has not returned to pre-2007 levels, and it’s challenging to increase supply rapidly due to land acquisition and regulatory processes.

Strong demand from various demographics, including millennials and Hispanics, contributes to the low inventory. Strict lending standards today, compared to the lax standards in 2007, ensure that borrowers have excellent credit, reducing the risk of a housing market crash. Moreover, a drop in foreclosures and homeowners’ stronger personal balance sheets further mitigates the likelihood of a foreclosure crisis in Idaho.

3. Colorado  

Colorado stands out as an enticing destination for real estate investments. Its breathtaking natural beauty, including the Rocky Mountains, attracts outdoor enthusiasts and adventure seekers year-round. Boasting a robust economy driven by technology, healthcare, and tourism, cities like Denver and Boulder offer promising opportunities for real estate appreciation. 

The state’s commitment to sustainability and a high quality of life make it appealing to a diverse range of residents. With a thriving job market, strong rental demand, and a variety of property types, Colorado represents a smart choice for investors seeking both financial growth and a rewarding lifestyle.

The facts

In August 2023, Colorado’s statewide housing market exhibited notable trends. The median price for homes stood at $579,999, reflecting the market’s price point. Meanwhile, the Average Sales Price in Colorado saw a substantial year-over-year increase of 11.5 percent, reaching $772,109. However, there was a slight dip in the Percent of List Price Received, which dropped to 99.0 percent, suggesting some negotiation room for buyers.

One significant change was the Average Days on Market Until Sale, which saw a remarkable 32.3 percent year-over-year increase, standing at 41 days. Closed sales also experienced a dip of nearly 15.7 percent compared to the previous year, and pending sales were down by 12.5 percent, indicating some market cooling.

The Months Supply increased by almost 17.4 percent to 2.7 months, signaling that Colorado was favoring sellers in its real estate market. However, a decrease of 9.9 percent in New Listings year-over-year indicated a potential decrease in seller optimism. These combined factors painted a dynamic picture of Colorado’s housing market in August 2023, reflecting both price growth and shifting market conditions. 

4. Texas

Texas emerges as a prime real estate investment destination due to its diverse economy and population growth. Cities like Austin, Houston, and Dallas are tech and business hubs, driving demand for housing and commercial properties. Texas’s absence of state income tax fosters a business-friendly environment, attracting corporations and job seekers alike. 

The state’s affordable cost of living, favorable property tax rates, and strong rental market enhance its investment appeal. With an array of property types and a resilient real estate market, Texas offers investors a blend of financial growth, economic stability, and abundant opportunities for profitable investments.

The facts

In the first quarter of 2023, Texas saw shifts in its housing market. Active listings and the average time Texas homes spent on the market increased compared to the same period in 2022. The median price of Texas homes, however, remained relatively stable.

Texas homes took an average of 64 days to go under contract, marking a significant increase of 27 days from the first quarter of 2022. The median sales price reached $326,800 during Q1 2023, representing a modest 0.6 percent uptick compared to the previous year.

Despite a 17 percent home sales decrease for the year’s first quarter compared to last year’s, Texas still experienced significant activity in the $200,000 to $399,000 price range. Months of inventory expanded from 1.1 to 2.7 months, reflecting market changes.

5. Alabama

Image by Ronnie George on Unsplash

Alabama is an enticing choice for real estate investments. Its affordability, with a lower cost of living and property prices, attracts families and retirees seeking value. The state’s cities, like Birmingham and Huntsville, experience steady economic growth, fostering job opportunities and housing demand. Favorable property tax rates enhance the investment appeal. 

Alabama’s commitment to manufacturing and aerospace industries ensures a stable job market. While it may not be as well-known as other states, Alabama’s affordable entry point, consistent population growth, and potential for property appreciation make it an appealing destination for savvy real estate investors seeking value and long-term gains.

The facts

As of September 2022, Alabama’s median home sale price had surged to $281,500, marking a significant 9.2 percent year-over-year increase. The market continues to be competitive, with 27 percent of homes selling above their listing price.

Nevertheless, indications point to an imminent correction in the Alabama housing market. Sales volume declined 14.8 percent compared to the previous year, totaling 5,149 transactions in September 2022.  

The inventory of available homes is rising, relieving prospective buyers who have faced a red-hot housing market for the past two years. In September 2022, there were 18,124 homes for sale in Alabama, including 5,457 newly listed properties. 

In the year-over-year comparison, both figures increased by 9.4 percent and 9.5 percent, respectively. However, Alabama’s housing market remains firmly in favor of sellers, with only a two-month housing supply. This is slightly higher than the previous year but still far from the five to six months required for a balanced market.

What To Consider When Researching Real Estate Opportunities  

Not all areas are created equal when it comes to investment opportunities. When researching for one in different states, consider the following factors to help you make educated decisions and maximize your potential returns:

Market conditions and trends

One of the first aspects to examine is the current state of the real estate market in the target state. You’ll want to identify whether it’s a buyer’s or seller’s market. A buyer’s market generally means more properties are available than buyers, potentially leading to lower prices and favorable negotiation terms. Conversely, a seller’s market suggests limited inventory and higher buyer competition, which could increase prices.

Additionally, research market trends and forecasts. Look for states with a history of steady or increasing property values. A growing population, job opportunities, and economic stability often correlate with a strong real estate market.

Location, location, location

Real estate is all about location, and this adage holds true for investment properties as well. Analyze the specific cities and neighborhoods within your target state. Focus on areas with desirable attributes such as good schools, low crime rates, and proximity to transportation. Consider the potential for future development and infrastructure improvements that could boost property values.

Economic indicators

Evaluate the economic health of the state and its cities. Look for low unemployment rates, diverse industries, and a strong local economy. A robust job market can drive demand for rental properties, ensuring a consistent income stream. Pay attention to key economic indicators such as GDP growth, job growth, and income levels.

Rental market analysis

If you’re considering investing in rental properties, thoroughly assess the local rental market. Investigate rental vacancy rates, average rental rates, and rental demand. A lower vacancy rate and strong rental demand indicate a healthy rental market, making it easier to find and retain tenants.

Moreover, consider the legal and regulatory environment for landlords in the state. Some states have more tenant-friendly laws, while others provide more protections for landlords. Be aware of rent control ordinances, eviction procedures, and property management regulations.

Property taxes

Property taxes can significantly impact your investment’s profitability. Research property tax rates in the state and understand how they are calculated. Some states have lower property tax rates, while others might have higher rates but offer various exemptions or deductions. Carefully evaluate the tax implications of your investment, as they can vary widely from state to state.

Financing options and interest rates

Investigate the availability of financing options and prevailing interest rates in the state, including refinance home loan rates. Favorable financing terms can significantly affect your investment’s affordability and overall return on investment (ROI). Additionally, consider your financial situation and creditworthiness when exploring financing opportunities.

Local demographics

Analyze the demographics of the area to gain insights into your potential tenant base. Consider factors like population growth, age distribution, and household income levels. Understanding the local demographics can help you tailor your investment strategy to the needs and preferences of your target market.

Property condition and maintenance costs

When researching investment properties, assess the condition of the buildings. Determine whether they require immediate repairs or renovations and estimate the associated costs. Maintenance and repair expenses can eat into your profits, so it’s essential to have a clear understanding of the property’s condition.

Exit strategy

Develop a well-defined exit strategy before investing. Consider whether you plan to hold the property long-term, sell it after a certain period, or use it for short-term rentals. A clear exit plan will guide your investment decisions and help you attain your financial goals.

Local regulations and zoning

Local regulations and zoning laws can significantly impact your investment plans. Research zoning ordinances to understand how you can use the property and whether there are any restrictions or limitations. Be aware of any upcoming zoning changes that could affect your investment.

Competition

Assess the level of competition in the local real estate market. A highly competitive market may require more extensive research and a well-thought-out strategy to secure profitable opportunities. On the other hand, a less competitive market may offer more attractive investment prospects.

Quality of life

Consider the quality of life in the area, as it can impact your ability to attract and retain tenants. Factors such as cultural amenities, recreational activities, and access to healthcare and education can make an area more appealing to renters and potential buyers.