CNN
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Potential homebuyers in the Northeast and Midwest may be disappointed: Despite signs of a slowdown in the highly competitive real estate market last year, a new report from Zillow says some areas will remain particularly competitive this year.

Zillow Report Predicts Hottest Real Estate Markets for 2025; Buffalo, a city on New York’s western border with Canada, is at the top of the list.

According to the report, two new jobs per home are allowed in Buffalo. That means Buffalo could see an influx of new workers coming to the city, causing housing construction to lag even further behind housing demand, said Skylar Olsen, Zillow’s chief economist. As a result, Buffalo real estate prices are expected to rise another 3% in 2025 after rising nearly 6% last year, according to the report.

Buying a home has become more difficult for many Americans because of high mortgage rates and a lack of affordable options, making frustration so great that it even helped fuel anger toward incumbents in last year’s U.S. election stir up. Now Zillow’s report shows that the deck could Home shoppers will still face problems in many major American cities this year.

Indianapolis; Providence, Rhode Island; Hartford, Conn.; and Philadelphia are expected to remain hot markets this year, according to Zillow. Property prices in these cities are expected to rise between 3% and 4% on average.

Zillow, an online real estate marketplace, ranked the country’s 50 most populous metro areas by “hotness” by combining its internal projections of home value growth with the speed at which homes sell, as well as publicly available data on job growth and home approvals.

“In a lot of these areas, construction has really struggled to keep up,” Olsen told CNN. “The reason new construction is so important right now is because existing owners are tied up. This is a key factor in the price pressure.”

Many economists expected mortgage rates to fall by the end of last year, especially after the Federal Reserve cut rates three times in 2024. But mortgage rates, which determine home loan rates, remained higher than expected. The average 30-year fixed mortgage rate was 6.91% last week, according to Freddie Mac.

Increased mortgage rates have made existing homeowners with lower mortgage rates reluctant to sell, effectively “locking them in” to their current homes.

“Areas like Buffalo and much of the Northeast are so locked in, and the existing owners are just hanging on,” Olsen said.

But open-minded buyers may find better terms elsewhere.

Zillow predicts that home prices will decline in 2025 in several cities, including New Orleans, San Francisco, San Jose and Austin.

“In less competitive markets, you have a lot longer to make your decision, homes stay on the market longer and there are more available,” Olsen said.

However, home ownership in a city like New Orleans or Austin can be a double-edged sword. Falling property prices can mask other costs.

In Louisiana, Texas and California, insurance costs for homeowners have skyrocketed in recent years as insurance companies seek to offset losses from natural disasters such as hurricanes and wildfires, according to a report last year from online insurance marketplace Insurify.

“Since 2022, homeowners’ insurance premiums have gone up and it’s becoming more and more unaffordable,” Leslie Heindel, a real estate agent in New Orleans, told CNN last year. “You can get something cheaper here now, but there’s a reason for it.”