- Competition among buyers never cooled in Buffalo last year, and that heat should keep smoldering through 2025.
- Hot markets spread from the Northeast, Great Lakes and South regions into the Midwest and West.
- Virginia Beach jumped farthest up the list from 2024, leapfrogging over 23 markets.
Zillow expects Buffalo, N.Y., to be the nation’s hottest housing market in 2025, with Indianapolis, Providence, Harford, and Philadelphia rounding out the top five. Buffalo was also predicted to be the hottest market of 2024, making it the first market to hold the title in back-to-back years. Relative affordability and supply that trails demand are common threads among what should be the most competitive markets for buyers in 2025.
Nationwide, Zillow forecasts relatively slow and steady growth for both home values and sales in 2025, though affordability and unpredictable mortgage rates will present familiar headwinds. Inventory should continue to recover from a deep pandemic-era deficit.
Zillow’s list of the hottest markets is based on an analysis of forecasted home value growth, recent housing market velocity and projected changes in the labor market, home construction activity and number of homeowner households. [1]
Zillow forecasted Buffalo to be the hottest market in 2024 and that prediction proved prescient. Sellers held a strong advantage in negotiations there throughout last year, according to Zillow’s market heat index.
New jobs often mean new residents, which raises competition and drives up prices unless builders can match the additional demand. 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.
Meanwhile, Indianapolis’s second-place rank can be chalked up to its strong home price forecast for this year, which is expected to be greater than the appreciation it experienced in 2024.
Relative affordability is a powerful force, too. Nearby alternatives to expensive Northeastern cities like New York City and Boston dominated Zillow’s list of the most popular cities among home shoppers in 2024. Metropolitan areas in the same vein — Providence, Hartford and Philadelphia — rank high on this list as well.
Rising fastest in the ranks from 2024’s hottest markets list is Virginia Beach, which leapt over 23 markets to the No. 13 spot this year, driven by job growth that has far outpaced new home permitting. Memphis fell the farthest by the same token, dropping 30 places, as new home permitting has eclipsed low job growth.
Here’s a closer look at what shot markets to the top of the list:
Price Growth
Home value growth inched closer to historical averages in 2024, only to slow in the latter half of the year as mortgage rates fluctuated. While not all markets will see prices grow faster this year than last, all but five are expected to have positive appreciation. Home value growth is set to largely level out this year — even these standout metros look tame compared to the double-digit annual appreciation seen in 2021 and 2022.
Among the top-five hottest markets of 2025, only Indianapolis has a rising outlook for home value appreciation, increasing from 2.8% annual appreciation in 2024 to 3.4% in 2025. Buffalo experienced strong appreciation at 5.8% in 2024, but is expected to drop to 2.8% in 2025. Meanwhile, home prices in 2022’s hottest market Tampa are expected to make a comeback, turning around from a 0.8% decline last year to 2.2% growth projected over the next 12 months.
Inventory & Velocity
The inflow of new listings recovered slightly over the course of 2024 but rate-lock has kept inventory from rising to pre-pandemic levels. Meanwhile, homes are typically staying on the market longer before selling. It’s likely that these low-inventory markets, where homes sold quickly in 2024, will continue to experience outsized demand relative to supply in 2025. The markets with the fewest listing days per home in 2024 – those where inventory was lowest and sold the fastest – were Hartford, Cincinnati, and Columbus, the same three markets as the previous year.
Demographics
Baby boomers and millennials represent two enormous generations, and both are very active in the housing market. Baby boomers are hardly exiting the market as they age, a departure from previous generations at the same age, and millennials are aging into their prime home buying years as they hit their early and mid-thirties.
In 2025, 42 of the 50 largest markets are expected to see homeownership rise. The market with the biggest lift in the for-sale market is Austin, with a trend suggesting the formation of 8.9% more owning households (assuming there are homes available for them to buy). Orlando and Jacksonville follow at 8.6% and 7.8%, respectively. Of the markets with negative demographic pressure, Birmingham is expected to have the biggest drop in homeowning households (-2.9%), then Hartford (-2.7%), and Oklahoma City (-2.6%).
Of the markets studied, the coolest metro areas of 2025 are expected to include New Orleans, San Francisco, San Jose, Portland, Ore., and Austin. These markets are characterized by weak demographic and job market pressures relative to the housing environment and flat or falling home value projections; most notably in New Orleans, where Zillow expects the typical home value to fall by 3.8% in 2025.
Methodology
The final index was based on the following data:
- Forecast annual home value appreciation in Nov. 2025
- Forecast acceleration in home value appreciation, Nov. 2024 – Nov. 2025
- Listing days per home, Jan. 2024 – Nov. 2024
- Two-year change in total non-farm employment per two-year residential building permit total
- Projected change in owner-occupied households, 2024 – 2025
Metrics were normalized given the available metro-level data to standard deviations from the mean, with mean and standard deviation weighted based on housing unit counts, and capped at ±1.96 to prevent penalizing any metro for extreme data points. The final index is an average across metrics, with standardized home price appreciation acceleration down-weighted by half.
Inventory and velocity are represented by listing days per home, using published Zillow data for Median Days to Pending and New Listings.
Job market and building data took the ratio of the change in employment to the total permitted residential structures. Total non-farm employment (seasonally adjusted) comes from the U.S. Bureau of Labor Statistics Current Employment Statistics survey. We used the 3-year change in employment Nov. 2021 – Nov. 2024.
Building permit data comes from New Private Housing Structures Authorized by Building Permits. We sum over the 2-year period Nov. 2022 – Nov. 2024.
To assess the underlying demographic pressure in the for-sale housing market, we used the projected change in homeowner households 2024-2025. This projection accounted for population aging and migration patterns. Data came from the American Community Survey (2022 ACS 5-year sample and 2023 ACS 1-year sample) downloaded from IPUMS USA, University of Minnesota, www.ipums.org.
The first stage uses the larger five-year sample to calculate entry and exit from the population (due to birth, migration, death) by age. For each birth cohort the age-specific outflow was set to be the difference between the cohort’s population in 2023, less in-migration, and the cohort’s population in 2022. The population inflow and outflow divided by the population in 2022 yields the rate of change entering their 2023 age.
The second stage applies the age-specific rates of population change to the 1-year sample, iterating over 2024-2025. We filtered to ages 18-89 to avoid low population counts and unreliable migration trends at the highest ages. Keeping constant the observed age-specific share of the population who is the head of household of an owner-occupied housing unit (the “owner-headship rate”), we estimate the percentage change in the number of owner-heads expected in 2025, compared to 2024, by age. Summing these changes gave us a demographically expected rate of increase in homeowner households in 2025.
All population and owner-headship counts were smoothed across ages over a 5-year centered window prior to taking rates and changes.
[1] Analysis is applied to the top 50 metropolitan areas by population.
