S
econd-tier cities are gaining popularity, with Buffalo, New York, topping the list of hottest housing markets for the second year in a row. Americans are fleeing pricey metros due to high home prices and mortgage rates, opting for smaller, more affordable cities instead. Zillow's latest report reveals that lesser-known cities are outperforming traditional hotspots.

    Real estate experts analyzed factors such as projected home value growth, job openings, inventory levels, and population shifts to identify rising markets. These areas may be challenging for buyers but offer lucrative opportunities for sellers. Buffalo took the top spot for the second consecutive year, a first in the study's history, thanks to its booming job market and tight housing supply.

    As employers hire more workers, the demand for homes exceeds the available supply, driving up prices. Zillow believes Buffalo homeowners are benefiting from this imbalance, with new employees competing for limited residences, thereby increasing home values. Indianapolis landed in the number two spot, projected to see higher home price appreciation in 2025 than in 2024.

    The top five cities also include Providence, Rhode Island; Hartford, Connecticut; and Philadelphia, all located near major metropolitan areas like New York City and Boston. While the national housing market is slowly recovering from the pandemic, competition for available homes remains high. Indianapolis' housing market is expected to appreciate the most in 2025, followed by cities near Boston and New York.

    Zillow also predicted that some of the fastest-selling markets in 2024, such as Hartford, Cincinnati, and Columbus, will remain in high demand through 2025. Buyers may be able to secure better-than-expected prices in other sought-after cities, while major cities like San Francisco and Austin are expected to become less competitive due to weaker job growth numbers.