While the national housing supply recently reached a four-year high, a new Zillow report suggests that buying a home in some U.S. cities may be especially difficult in 2025.
To make its predictions, Zillow reviewed multiple factors — including how quickly homes have been selling and its forecast for home value growth — in the 50 most populated cities nationwide.
Zillow’s analysis determined that cities primarily on the East Coast could have the hottest housing markets in 2025.
Where are the hottest housing markets?
For the second year in a row, Buffalo, New York, held the top spot on Zillow’s list. The company highlighted the city’s relative affordability and job market as the driving factors behind Buffalo’s competitive real estate status.
“Construction that keeps pace with an area’s growth remains crucial to keeping homes available and accessible. In chilly Buffalo, competition among buyers will remain hot, with employment growing far faster than builders are adding homes,” said Skylar Olsen, Zillow’s chief economist.
Zillow predicts that Indianapolis will be the second-hottest market. Like other Midwestern cities that landed at the top of the list, the metro tends to have “lower-than-average home prices and rent costs,” which has fueled the competition for buyers.
Virginia Beach, Virginia, jumped more than 20 spots over last year’s rankings. According to Zillow, it earned the No. 13 spot on its list thanks in part to “job growth that has far outpaced new home permitting.” Alternatively, Memphis, Tennessee, dropped 30 spots because the number of new homes being built is outgrowing job growth.
Three Ohio metros—Cincinnati, Columbus, and Cleveland—also dropped significantly in the ranks. In 2024, they ranked Nos. 2, 3, and 8, respectively. This year, they ranked Nos. 11, 12, and 14, respectively.
Other significant metros that dropped in the rankings were Orlando and Tampa, Florida; Atlanta, Georgia; Las Vegas, Nevada; and Los Angeles, California. You can view Zillow’s complete list here.
What will home buying look like in 2025?
It could still be difficult regardless of where you’re shopping for a new home. Olsen warns that mortgage rates could be unpredictable throughout the year, but there is good news: “Shoppers nationwide should see more options for sale than in recent years, along with slow and steady price growth.”
Zillow currently reports that the strongest housing markets for sellers are in the Northeast. That includes multiple New York cities — Rochester, Syracuse, Buffalo, and New York City — and Connecticut, Massachusetts, and Rhode Island metros. The only non-Northeastern city considered a “strong seller’s market” is San Jose, California.
Cities primarily in the south, from Florida to Texas, are considered buyer’s markets. Zillow ranks Cape Coral, Florida, at the top of that list, followed by McAllen, Texas; New Orleans, Miami; and Jackson, Mississippi.
According to Freddie Mac data, the average 30-year mortgage rate hit 6.85% by the end of 2024, the highest reported since July 2024. In a statement, Freddie Mac’s chief economist Sam Khater said “an overwhelming undersupply of homes” is plaguing the market.
The Federal Reserve could cut rates, albeit slowly, in 2025, which could benefit mortgage rates. (While the Fed doesn’t set mortgage rates, it does influence them.) Long-term mortgage rates generally track the yield on the 10-year Treasury note, which is driven in part by the market’s outlook for inflation and the Fed’s benchmark rate.
That means that cuts to the Fed’s key rate can indirectly put downward pressure on mortgage rates, even if they don’t move in lockstep.
