Title: Troubles for Homebuyers in the Northeastern and Midwestern Regions
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Buffalo, located on New York's western border with Canada, takes the top spot in Zillow's forecast for the hottest housing markets in 2025. With two new job opportunities for each home permit approved, the city is primed for an influx of new residents, further exacerbating the housing demand-supply gap, according to Zillow's chief economist, Skylar Olsen. Consequently, home prices in Buffalo are predicted to grow an additional 3% in 2025, following a near 6% increase last year.
Struggling to secure a home became more challenging for many Americans last year due to elevated mortgage rates and limited affordable housing options, resulting in mounting frustrations that ultimately influenced voting behavior in the US elections. Zillow's report suggests that numerous major American cities may continue to hinder home shoppers in 2025. Alongside Buffalo, Indianapolis, Providence, Rhode Island, Hartford, Connecticut, and Philadelphia are anticipated to remain high-demand housing markets, with an average home price growth of approximately 3-4%.
Zillow ranked the country's 50 most populous metros according to a combination of its internal home value growth projections, home sales velocity, and publicly available job growth and home permitting data. According to Olsen, construction in many of these high-growth areas is struggling to keep pace, putting further pressure on prices.
Economists had anticipated that mortgage rates would decrease by the end of last year after the Federal Reserve cut interest rates three times in 2024. But mortgage rates remained stubbornly high, with the average 30-year fixed mortgage rate closing at 6.91% last week. This high rate has kept existing homeowners with lower mortgage payments hesitant to sell, effectively "locking" them into their current properties.
However, potential buyers with a flexible approach might find more favorable conditions in markets forecast to experience home price decreases in 2025, such as New Orleans, San Francisco, San Jose, and Austin. As Olsen explains, less competitive markets offer buyers more time to decide, prolonging the home sale process and increasing availability.
Despite lower home prices, dwelling in cities like New Orleans or Austin may present a double-edged sword. Rising homeowners' insurance costs, driven by natural disaster payouts in Louisiana, Texas, and California, could offset potential savings. Insurify's report from last year revealed that homeowners' insurance rates have soared in these states, making homeownership less affordable.
In conclusion, although some cities are expected to see escalating home prices, shifts in mortgage rates and wage growth could bolster affordability, albeit at a slow pace. However, persistent high mortgage rates and an ongoing imbalance between supply and demand suggest that the housing market will remain challenging for buyers in 2025.
In light of Zillow's predictions, businesses related to real estate and construction in Buffalo are expected to witness significant growth due to the increasing housing demand. Furthermore, cities like Indianapolis, Providence, Hartford, and Philadelphia are also anticipated to continue seeing high-demand housing markets, providing opportunities for related businesses.
