Potential Home Shoppers May Face Disappointment in Some Cities
A new report from Zillow predicts that some areas in the Northeast and Midwest will continue to be highly competitive in 2025, making it challenging for potential homebuyers. Buffalo, New York, tops the list as the hottest housing market, with two new jobs per home permitted, leading to a predicted 3% increase in home prices this year.
Indianapolis, Providence, Rhode Island, Hartford, Connecticut, and Philadelphia are also expected to remain hot markets, with average home price growth ranging between 3% and 4%. The Zillow report combines internal home value growth projections with data on home sales and publicly available job growth and home permitting data to rank the nation’s 50 most populous metros by “hotness.”
The report highlights how elevated mortgage rates and a lack of affordable options have contributed to frustration among homebuyers, who are often shut out of the market. The Zillow report suggests that new construction has struggled to keep pace with demand, leaving existing homeowners “locked in” and contributing to increased home prices.
Mortgage rates have remained higher than expected, with the average 30-year fixed mortgage rate at 6.91% last week. This has led to a reluctance among existing homeowners with lower mortgage rates to sell, effectively “locking” them into their current homes.
In contrast, buyers may find more favorable conditions in cities where home prices are expected to fall, such as New Orleans, San Francisco, and San Jose. However, homeownership in these cities can come with hidden costs, including rapidly rising homeowners’ insurance rates in Louisiana, Texas, and California.
