B
uffalo, New York's second-largest city, has become the country's hottest housing market for 2025, according to Zillow, driven by high demand and limited supply that's sending prices skyrocketing.

    The city's booming economy is creating two new jobs for every home built, attracting young families and professionals. However, its construction industry is struggling to keep up with this growth, leading to a surge in home values expected to climb another 3% this year after a 6% jump in 2024.

    This market frenzy has also spread to other Northeastern and Midwestern cities like Indianapolis, Providence, Hartford, and Philadelphia, where Zillow projects prices will rise 3-4% in 2025. Meanwhile, mortgage rates remain high, freezing the national market and locking homeowners into their existing loans.

    Freddie Mac reported an average 30-year fixed rate of 6.91%, leaving many sellers on the sidelines. The housing crunch is putting pressure on new construction to meet demand, but builders are falling behind, according to Zillow's chief economist Skylar Olsen.

    "In areas like Buffalo and the Northeast, existing owners are holding on, making it difficult for new construction to keep pace," Olsen explained. "New construction is crucial now because existing owners are locked in, putting pressure on prices."

    For buyers willing to explore other regions, relief may be on the horizon. Zillow predicts home prices will fall in cities like New Orleans, San Francisco, San Jose, and Austin, where competition is less intense.

    "In less competitive markets, you have more time to make a decision, homes spend longer on the market, and there are more available," Olsen said.