Buffalo, New York, is predicted to be the “hottest housing market” in the United States this year, with strong labor conditions expected to support the city’s home prices, according to a report from real estate marketplace Zillow.
Zillow also predicted Buffalo as the hottest market in 2024, “making it the first market to hold the title in back-to-back years.”
Last year, home values in Buffalo appreciated by 5.8 percent. This year, Zillow expects prices to rise by 2.8 percent. A key factor driving home gains in Buffalo is the creation of jobs.
“New jobs often mean new residents, which raises competition and drives up prices unless builders can match the additional demand,” the report said. “Buffalo has the most new jobs per new home permitted—a key component that’s kept Buffalo at the top of the list for two years running, along with expected appreciation.”
After Buffalo, Indianapolis, Providence, Harford, and Philadelphia are expected to round out the top five hottest housing markets this year. Indianapolis is predicted to see home prices increase by 3.4 percent, higher than the gains it made last year.
“Relative affordability and supply that trails demand are common threads among what should be the most competitive markets for buyers in 2025,” said the report.
Zillow is expecting nationwide home values and sales to experience a “slow and steady” growth in 2025, with “unpredictable” mortgage rates and affordability concerns posing a challenge.
The company’s Homebuyer Demand Index, which measures home tours and other buying services from the brokerage’s agents, rose by 2 percent for the week ending Jan. 5 from a month back.
“There are several reasons a few more buyers are out there: Some have accepted high mortgage rates; daily average rates hit a seven-month high this week and they’re unlikely to decline significantly soon,” said the report.
“Some are jumping into the market now that the holidays have passed and a new year has begun, and some are taking advantage of the fact that there are more homes on the market than there have been over the last few years.”
Mortgage Rate Challenge
Mortgage rates have been rising since roughly mid-December. The average weekly rate for a 30-year fixed-rate mortgage is currently at 6.93 percent. Rates have risen for four consecutive weeks.“The lack of entry-level supply also remains an issue, especially for those looking to become first-time homeowners.”
He expects the 30-year fixed-rate mortgage rate to be around the 6 percent range for most of the year, going beyond 7 percent for a short period. McBride predicts rates to be at 6.5 percent by the end of the year.
“Solid economic growth, wage growth that is ahead of inflation—that is what gives homebuyers the confidence to take the plunge,” he said. “In an environment where rates are still in the 6’s, that’s our new normal for now.”
The upcoming meeting of the U.S. Federal Reserve scheduled later this month could signal more decline in mortgage rates if the central bank reduces its benchmark interest rate.
