Has anyone ever heard that you should never live in the 1st house South of a cemetery, and why that would be?

A lot has to do with the newly dead. They like to roam around at night and any house near a cemetery can be inviting to them to visit.

Breaking a mirror will cause 7 years bad luck.
Step on a crack and you'll break your mother's back.
Same thing.

I know of someone who will hold his breath the entire time he drives past a cemetery. If you ask me, that's one way to wind up in one.

Some people are just suspicious beyond reason.

Maybe it was inspired by this movie: House By The Cemetary Movie - The 80s Movies Rewind
Or maybe the movie was inspired by the legend. Either way it's ridiculous.

I'm not familiar with the particular piece of folklore to which you refer. Many cultures identify a particular compass direction as being the direction in which one finds the gateway between our world and the world of the dead. For many Native Americans, it is the west. For Celtics, I read somewhere, it is north--somebody help me here, I'm not deeply versed in the Celtic pantheon: Isn't it the castle of Emania or something like that, land of Arianrhod? Many Christians connect it to the East, the rising sun/Son of the Day of Judgment, and even orient graves so that when the dead arise and sit up, they'll be facing toward Him when he arrives. But south? I don't know.

In my experience, a lot of deeply spiritual people end up living close to graveyards. And skeptics who are smart enough to know you can sometimes get real good deals on real estate, because the superstitious are scared off. ;)

When I was younger and still believed in all that stuff I spent a night in a house that bordered a cemetery. By bordered I mean within 5 feet. I couldn't sleep at all that night. Lol.