These 5 Sun Belt cities could be hot for real estate investors in 2025 — here’s how you can tap into these markets

December 29, 2024

If you’re looking for this season’s hot housing markets, it seems appropriate that your first stop should be the Sun Belt, a new report finds.

The 2025 edition of Emerging Trends in Real Estate, a joint effort by PwC and the Urban Land Institute, forecasts that five areas are especially ripe for real estate investment. In order of potential, the markets are Dallas, Miami, Houston, Tampa-St. Petersburg, Fla., and Nashville.

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The homebuilding prospects list looks much the same, though with a few notable differences. Dallas again appears (this time ranking fourth), with Tampa-St. Pete, Ft. Lauderdale and Southern California’s Inland Empire finishing first, second and third respectively. Atlanta rounds out the top five.

Sun Belt cities made up 13 of the top 20 markets to watch; Realtor.com’s analysis of the findings adds context that investment hopefuls will find useful.

In Dallas, for example, homes carry an average list price of $434,500, while median monthly rents run $1,475. Assuming a 20% downpayment ($86,900), a 30-year mortgage at the current rate of 6.78% (as of Nov. 14) means a monthly payment of $2,261. Assuming you charge the average rent, the difference you’d have to pay before taxes and insurance is just $786.

That’s great news, even more so if you can reasonably charge more. But certain risks come with moving (your money, that is) to the Sun Belt. We’ll examine a few and offer three tips to heat up your property investment portfolio.

With the Sun Belt, buyers should most definitely beware. The PwC/ULI report simply doesn’t tell the whole story, and this by no means involves trivial details. Much of the broader context comes by way of residential market statistics.

Florida suffers from a home insurance crisis largely attributable to hurricanes, flooding and tornadoes sparked by climate change, along with extensive fraud. Homeowners pay the highest annual amounts for home insurance, an average of $10,996 in 2023 according to Insurify.

Meanwhile, Miami makes another top five list: It’s No. 2 on Insurify’s list of the 10 most expensive cities for homeowners insurance. It also borders Hialeah, tops in the nation at $17,606. And no wonder the high rates: the Federal Emergency Management Agency (FEMA) gives the Miami-Dade County area a risk rating of 91.6 out of 100.

While the Emerging Trends study ranks Austin, Texas, as No. 15, the exploding community of Kyle, just 22 miles southwest, is also in the throes of a climate crisis. Its underground aquifer is shrinking, drought conditions persist and temperatures hit nearly 100 degrees before summer even started, the Wall Street Journal reported in August.

Yet there’s no sense in getting scared off from investing in opportune markets, especially when you consider that areas such as Atlanta carry none of these risks. Neither do Boston and Salt Lake City, which while not in the Sun Belt still finished eighth and ninth on the overall prospects list. The Sun Belt entry of Nashville also benefits from relatively calm climate conditions.

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No matter the caveats in the nation’s top five markets for real estate investing, chances to make money undoubtedly exist. How can investors pinpoint the best prospects and analyze investments with the highest potential?

Get granular. What applies in the neighborhood of one metropolis often deviates sharply from the next, while depressed areas on the upswing may represent burgeoning opportunities. Miami, for example, has a population of 442,000 and 2.7 million inclusive of the Dade County area. The David Siddons Group, an area real estate firm, places West Coral Gables and Miami Beach as the top two appreciating areas, at 183% and 135% respectively.

Consider leveraged financing. The report points to hopeful signs for those who want to finance their purchases through inexpensive borrowing. More than 80% of survey respondents believe commercial mortgage rates will drop in 2025, while 75% expect rates to decline further in the next five years. That could prove especially rewarding should you time your investment to take advantage of the improving credit conditions many expect.

Follow markets in real time. While the Emerging Trends report extrapolates into 2025 as a whole, market conditions can shift — and for the better, should new development plans make the news. Here it pays to tap local experts or follow homebuying markets via Redfin, Zillow or Realtor.com.

Figures from the U.S. Census Bureau will also give you an idea of median household income, age demographic and rent growth (as listed on the Miami-Dade County information page) — though how much you stand to make is a matter of numbers yet to unfold.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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