Don't Buy a Home in These Five U.S. Cities

 

Don’t Buy a Home in These Five U.S Cities with Shrinking Populations and Declining Numbers of Buyers

Nearly half of the 30,000 cities in the United States are expected to see population decline by the end of the century, which could lead to lower home prices in these areas.

Cities like Detroit, Birmingham, St. Louis, Baltimore, and Cleveland have seen significant population declines in recent years, which may impact the resale value of homes in these areas.

Although some cities like Detroit are seeing home values rise in the face of declining populations, buying a home in these shrinking cities may pose the risk of losing money in the long run.

Smart homebuyers know that location is almost everything in the search for the perfect property. However, one thing you may need to consider is that a particular city's population affects the resale value of your home if you decide to sell it.

The U.S. Census Bureau reports that nearly half of America's 30,000 cities will see population decline by the end of this century. Overall, the population is likely to rise to 366 million by 2100, showing that the population is growing slower than in past decades.

However, the decline in urban population is not just about people being born; The decline in urban population indicates people moving to suburbs and rural areas.

As the number of potential buyers declines and fewer people move to cities, home prices in these urban areas may decline in the coming decades. According to a study conducted by Freddie Mac and published by InsiderMonkey.com, home values in shrinking cities fell 2.7% on average, compared to a 3.8% rise in growing cities.

A shrinking population may also have other economic side effects, including reduced consumer spending, fewer businesses, and job losses.

If you want to move to an economically healthy city, which increases the odds of your home investment going up, avoid these five cities.

Detroit, Michigan

Since the 1950s, when Detroit was America's fifth-largest city, this city known as the home of major American automakers has lost 61% of its population. In the past five years, the population has declined by 7.83% on InsiderMonkey.com.

Despite the population loss, studies show home values are rising in Detroit. According to the Detroit News, residential property values jumped 23% in 2023 and have tripled in the past seven years.

However, just because Detroit has, so far, bucked the trend of declining property values as the population declines, that doesn't mean it will continue. Buying a home in Detroit now could mean losing money if you decide to sell within the next few decades.

Birmingham, Alabama

Despite its warm climate and proximity to stunning Gulf beaches, InsiderMonkey.com reports that Birmingham's population has declined at a rate of 7.7% in the past five years. Like other major cities, people move to the suburbs and out of the city center.

According to Redfin, home prices in Birmingham are rising, but the average sale price is 52% lower than the national average. Homes stay on the market for an average of 46 days, and the average home sells for 3% less than the asking price. If this trend continues, selling a home in Birmingham could become difficult.

St. Louis, Missouri

St. Louis, Missouri, has lost 7.14% of its population in the past five years due to various factors. InsiderMonkey.com cited high crime, a tight job market, and population migration to surrounding suburbs as the main reasons for migration to urban areas.

Based on Redfin statistics, St. Louis home prices have already begun to decline, with prices down 3.9% in March 2024 compared to March 2023.

Baltimore, Maryland

According to InsiderMonkey.com, Baltimore's population has declined by 6.82% in the past five years. This is the city's lowest population since the first decade of the 20th century. High crime rates, job losses, and suburban housing have contributed to this decline.

However, Baltimore has not yet fallen victim to falling housing prices. Its proximity to Washington, D.C., can contribute to maintaining home values. Prices have risen 7.6% since last year, according to Redfin data. However, home prices may remain low as the population continues to decline.

Cleveland, Ohio

Cleveland's population has declined by 6.2% over the past five years. Like other Midwestern cities, Cleveland has fallen victim to the decline of heavy industry, suburbanization trends, and urban sprawl. In the 1980s, it lost its place as one of the ten most populous American cities.

Home prices rose 24.5% between March 2023 and March 2024, which may indicate revitalization. Homes are also selling faster, spending just 33 days on the market compared to 41 days last spring. However, you don't want to overspend on a home in this city because you may run into trouble if you try to sell in the coming decades.