Buffalo- a city that sits on New York’s western border with Canada has been named the hottest housing market for 2025, according to a new report from Zillow.
This recognition comes as the city grapples with a growing gap between housing demand and supply.
Buffalo has two new jobs for every home permitted, a ratio that indicates a tight housing market.
This means that Buffalo could see an influx of new workers moving to the city – pushing homebuilding to fall further behind housing demand, said Skylar Olsen, Zillow’s chief economist.
As a result, Buffalo’s home prices are forecast to grow an additional 3% in 2025 after jumping nearly 6% last year, according to the report cited by CNN.
Zillow, an online real estate marketplace, ranked the nation’s 50 most populous metros by “hotness” by combining its internal home value growth projections with how quickly homes are selling and publicly available job growth and home permitting data.
Northeast and Midwest cities face housing challenges
Buffalo isn’t alone in its housing struggles. Other cities in the Northeast and Midwest, such as Indianapolis, Providence, Hartford, and Philadelphia, are also expected to remain highly competitive in 2025.
Zillow’s report predicts home price growth of 3% to 4% in these areas, driven by limited inventory and slower construction activity.
“In many of these areas, construction has really struggled to keep pace,” Olsen told CNN.
A major factor contributing to the tight housing supply is the elevated mortgage rates and a lack of affordable options. Olsen said,
The reason new construction is so important right now is that existing owners are locked in. That’s a lot of the determinant of pressure on prices.
Despite the Federal Reserve cutting interest rates three times in 2024, the average 30-year fixed mortgage rate remains high, currently sitting at 6.91%, according to Freddie Mac.
These high rates discourage existing homeowners from selling, as many are locked into lower-rate mortgages.
“Areas like Buffalo and a lot of the Northeast are so locked in, and existing owners are just holding on,” Olsen said.
Opportunities and risks in less competitive markets
While some markets remain heated, others are cooling off.
Zillow’s report projects home price declines in cities like New Orleans, San Francisco, San Jose, and Austin.
“In less competitive markets, you have much longer to make your decision, homes spend longer on the market and there are more available,” Olsen said.
These regions offer buyers a chance to find more affordable options, but the lower prices may come with hidden costs.
Homeowners in Louisiana, Texas, and California have faced soaring insurance premiums in recent years as companies adjust rates to recover losses from natural disasters such as hurricanes and wildfires, according to a report from online insurance marketplace Insurify last year.
“Homeowners insurance rates have risen since 2022, and it’s getting unaffordable,” Leslie Heindel, a Realtor in New Orleans, told CNN last year. “You can get something cheaper here now, but there’s a reason for it.”
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