15 Best States to Invest in Real Estate in 2021

Published on July 13, 2021 at 10:27 am by Habib Ur Rehman in Lists, News

In this article we will take a look at the 15 best states to invest in real estate in 2021. You can skip our detailed analysis of the real estate industry’s outlook for 2021, and go directly to the 5 Best States to Invest in Real Estate in 2021.

The open international world order with fewer trade barriers has facilitated countries to open up for international investment. Real estate happens to be one of the booming markets for such investments. However, the global Covid-19 pandemic impacted the world economy the hardest since the 2008 recession.

With vaccination programs in effect around the world, the economy is recovering and with it, the optimistic sentiment of pre-pandemic market performance levels including in the real estate whose size stood at a staggering $9.6 trillion in 2019 according to MSCI Inc. (NYSE: MSCI) with the US sharing the largest portion of the global real estate sector.

As mentioned in a previous article, the US positions itself on the number 3 spot behind the EU and Netherlands for receiving the most foreign direct investment with the real estate market receiving a sizable 10% of the total investment. Much of it has to do with business friendly policies in the US which attracts a lot of capital from around the world. It is also the world’s largest and strongest economy with very high innovation rates, huge inflow of immigrants and opportunities.

When it comes to investment, there are a lot of publicly traded companies in the business that provide related services and consultation. Some of these companies include, Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI). However, there are many things to consider before investing in real estate in another country. There are factors according to IESE Business School that positively and negatively correlate with real estate profitability in a country.

Many variables like the rule of law, GDP growth, legal-political framework, urbanization and quality of infrastructure play a role in real estate market prediction. Fortunately for the US, the country has the majority of the positively correlating factors and almost none of the negatively correlating ones. It has a healthy GDP growth and size, high quality infrastructure, innovation, urbanized population, low crime, strong legal and political frameworks and investor protection. However, the most important metric is the total value appreciation in real estate over a certain period of time because this metric is determined by all the other factors that improve the real estate market of a country.

Some key factors that increase real estate appreciation are low mortgage rates, above average income and affordable cost of living. An affordable state with median income higher than the national average and a low mortgage rate increases people’s ability to buy residential and commercial properties. Simple supply and demand economics tells us that when the demand is high, the value appreciates. A low mortgage rate, an affordable market and a decent income combine to increase the demand in this sector. However, bear in mind that some US states may have very affordable cost of living but high mortgage rates, and this would still surge demand.

On the other hand, if the cost of living is high as well as the median income, then these factors can have a neutral effect on the real estate market. However if the cost of living is low and the median income is relatively higher, this surges real estate demand regardless of the mortgage rates. As companies begin to reopen offices and restaurants start to welcome diners, real estate companies like Realty Income Corp (NYSE: O), Simon Property Group Inc ( (NYSE: SPG), Equinix Inc (NASDAQ: EQIX), Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI) are set to gain in the coming months.

Best States to Invest in Real Estate in 2021

Our Methodology

For our list of the 15 best states to invest in real estate 2021, we’ve picked out the real estate appreciation rate as the key metric. Our source for the data about appreciation rates for different states mentioned in the list are from NeighborhoodScout. Mortgage rates for the states are mostly similar and stand at 2.9% based on figures from the Usbank. On the other hand, cost of living data for different states comes from Bestplaces based on government findings and median household income data comes from the report of government agency Hud User.

With that said, let’s now take a look at our list of the 15 best states to invest in real estate 2021.

Best States to Invest in Real Estate in 2021

15. California

California is the largest economy within the United States and is home to various tech companies, prestigious universities and the globally influential Hollywood. It is also the state that takes in the most immigrants and therefore, housing is in constant demand. There’s an upside and a downside to Californian real estate. The upside is that real estate investment is insanely lucrative in areas like Malibu and Beverly Hills and the downside is that it’s equally more expensive for both the resident and the investor.

The total appreciation in the past two years stands at 10% in the Golden State. The cost of living is significantly higher in California than the national average but so is the median household income, that stands at $90,000, also significantly higher than the national average for median household income. California is the least attractive on our list of 15 best states to invest in real estate in 2021 due to a very expensive cost of living but it’s in the list because of its attractive real estate market.

14. South Dakota

A landlocked northern state to make it to the list of 15 best states to invest in real estate 2021 is South Dakota. The state has had a residential property appreciation of 11% in the past two years. It has a slightly lower than national average median household income at $75,500. However, it is compensated by a much cheaper cost of living than the national average. A house on the national level in the US on average costs around $231,200. In South Dakota however, the average cost is $193,700.

So while median household income is only slightly lower than average in South Dakota, the cost of living is significantly lower. Add a low mortgage rate to that and you have a very hot real estate market.

13. Connecticut

Connecticut is a northeastern state in the United States bordered by New York to the west. The total appreciation for the past two years in the state is at 12.78%. The state’s median household income is significantly higher than the national average and is higher than $100K. Mortgage rate is low and the cost of living is only slightly higher than the US average.

You can also consider investing in REIT stocks like Realty Income Corp (NYSE: O), Simon Property Group Inc ( (NYSE: SPG), Equinix Inc (NASDAQ: EQIX), Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI) as they are set to gain in the coming months.

12. Indiana

Indiana is another beautiful American state to make it to the list of 15 best states to invest in real estate 2021. The real estate appreciation in total in the past two years has been 13%. Indiana is significantly cheaper than the United States at large when it comes to costs of living. Insofar as housing is concerned, a typical average house in Indiana costs around $142,000. Compare that to a typical house across the US which averages around $231K and you know Indiana’s real estate is a bargain.

Although median income is lower in Indiana, it’s not significantly lower than the national average and stands at $73,300. Mortgage rates are also low. All these conditions lead to a decent demand in real estate which drives the appreciation rate.

11. Ohio

Ohio is another northeastern state to have made to the list of 15 best states to invest in real estate 2021. The total real estate appreciation from the past two years in the state is at 14%. The cost of living in the state is significantly lower than the national average. For instance, a typical house in Ohio on average costs $140K, almost half the price of a house when it comes to the national average.

Median household income on the other hand is very slightly lower than the national average at $75,300. For comparison, the national average for median household income is $79,900. Mortgage rates are also low in the state. These conditions create a very suitable environment for people to buy residential and commercial properties and drive their demand as well as their appreciation over the years.

10. Oregon

Oregon is another state that has made it to the list of 15 best states to invest in real estate 2021. It is located in the northwestern region of the United States. Since the beginning of the 21st century, Oregon has had an impressive total appreciation of 128% up till 2021. The median income in the state is slightly higher than the national average and stands at $81,200.

Long-term investors can gain from real estate appreciate as well as through investing in stocks like Realty Income Corp (NYSE: O), Simon Property Group Inc ( (NYSE: SPG), Equinix Inc (NASDAQ: EQIX), Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI), especially when REITs are expected to gain value in the coming months because of economic reopening.

9. Tennessee

Another landlocked state in the US to make it to the list of 15 best states to invest in real estate 2021 is Tennessee. The state’s total appreciation for the past two years has been 15%. Cost of living in the state is significantly lower than the national average. For instance, an average house in Tennessee costs around only $164,500 significantly lower than the national average. However, median income is also lower than the national average but mortgage rates are low.

8. Rhode Island

Rhode Island is located in the southeastern region of the United States. Rhode Island has had a total real estate appreciation of 15% for the past two years. Cost of living in the state is somewhat higher than the national average but so is the median household income which is also higher than the national average to make a significant difference.

Median household income in the state is $88,000 as compared to the national average of $79,900. Apart from this, the mortgage rate is also low, at 2.9%.

In addition to real estate properties, investors are also watching REIT stocks like Realty Income Corp (NYSE: O), Simon Property Group Inc ( (NYSE: SPG), Equinix Inc (NASDAQ: EQIX), Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI) as they are set to gain in the coming months on the back of the economic reopening.

7. Washington

Washington is located in the northwest region of the United States. The state has had a total real estate appreciation of 16.17% over the past two years. While health and utilities are cheaper in Washington, the overall cost of living in the state is higher than the national average but this is mitigated by a higher than national median income of $91,600 and low mortgage rates which allow Washington citizens to buy homes with ease. This is what has allowed a decent appreciation rate when it comes to real estate in Washington.

6. New Hampshire

New Hampshire is another state to make it to the list of 15 best states to invest in real estate 2021. This state is located in the New England region of the United States. The state has a total appreciation of 16.34% for the past two years alone based on data from Neighborhoodscout. Cost of living in the state is slightly higher than the national average but the median household income is significantly higher than the national average household income at $98,200 while the national average is at $79,900. Mortgage rate is similar to the national average of 2.9%. These factors determine a good demand for the real estate market.

Apart from long-term investment in property, investing in REITs like Realty Income Corp (NYSE: O), Simon Property Group Inc (NYSE: SPG), Equinix Inc (NASDAQ: EQIX), Annaly Capital Management, Inc. (NYSE: NLY), American Tower Corporation (REIT) (NYSE: AMT), Prologis. Inc. (NYSE: PLD) and Crown Castle International Corp. (REIT) (NYSE: CCI) is also a good option, especially for income investors.

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