Homebuyers in the Northeast and Midwest battle fierce competition for homes

As of January 2025, the U.S. housing market, particularly in the Northeast and Midwest regions, is displaying signs of ongoing competition, despite earlier indications of a slight cooling. According to a recent report by Zillow, potential homebuyers in cities like Buffalo, Indianapolis, and Providence may face intense competition, as prices are expected to rise further. Notably, Buffalo has emerged as a focal point, predicted to see home prices rise by 3% this year after a substantial increase of nearly 6% in the previous year. This surge in Buffalo's housing market can be attributed to limited new housing construction, which has failed to meet demand as many existing homeowners remain locked into lower mortgage rates and are hesitant to sell. This situation restricts the availability of homes for sale, in turn pushing prices up higher. Additionally, other cities such as Hartford and Philadelphia are also predicted to have price hikes, ranging between 3% and 4%. While the Midwest and Northeastern markets exhibit high competition, Zillow forecasts a contrasting trend in cities like New Orleans, San Francisco, San Jose, and Austin, where home prices are expected to decline in 2025. These less competitive markets offer buyers increased flexibility, with homes remaining on the market longer and more options available. However, potential homeowners in these areas need to be cautious as skyrocketing homeowners’ insurance rates pose a significant challenge. These rising costs have been particularly pronounced in regions such as Louisiana and California due to the impact of natural disasters in recent years. The report further explains how lower construction rates are affecting home prices. Chief Economist Skylar Olsen notes that existing owners, locked into lower fixed mortgage rates, are reluctant to sell their homes, thus limiting supply in the market. This situation is creating price pressure, especially in competitive urban areas. As the U.S. housing landscape continues to evolve, buyers must weigh their options depending on their priorities - whether to engage in a highly competitive market like Buffalo or to explore more affordable areas facing declining prices and challenging insurance costs. The balance of supply and demand remains critical as prospective buyers navigate their home-buying journeys this year.