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Why Buffalo will be 2024’s Hottest Market – Zillow Research

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  • 2024’s hottest markets all boast solid economic fundamentals, relatively fast-moving for-sale housing inventory, plentiful likely buyers and expectations for stable home values.
  • The Midwest, Great Lakes and South are home to most of 2024’s hottest markets – Cincinnati, Columbus, Indianapolis and Providence top this year’s list.
  • Last year’s hottest market, Charlotte, remains near the top of the list in 2024, in part thanks to expectations for a modest increase in home values.

Zillow expects Buffalo, N.Y., to be the nation’s hottest housing market in 2024, with Cincinnati, Columbus, Ohio, Indianapolis and Providence, R.I. rounding out the top five. These should stand out as strong in a housing market still buffeted by low inventory and relatively high mortgage rates and prices. While mortgage rates have come down significantly in recent weeks, and projections for improved affordability and more homes for sale have become more common, the challenges that limited the U.S. housing market last year are unlikely to disappear entirely in 2024.  


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Zillow’s list of the hottest markets in 2024 is based on an analysis of forecast home value growth, recent housing market velocity and projected changes in the labor market, home construction activity and number of homeowner households. [1]

Vaulting Buffalo to the top of the list are recent increases in the number of jobs created compared to the number of new homes construction projects being approved, as well as expectations for steady home values. Meanwhile, Cincinnati’s second-place rank can be chalked up to its high market velocity – for most months of 2023, homes that went pending in Cincinnati did so in a median of just five or six days.

Here’s a closer look at what shot markets to the top of the list: 

Price Growth

Home value growth slowed in 2023, fueled in large part by the highest mortgage interest rates seen since 2008. Only 15 of the 50 largest markets are expected to see home values grow in 2024. Even the fastest-growing markets of 2023 are expected to see significant slowdowns in the year to come. Hartford had the highest year-over-year home value growth of any of the country’s large markets  in 2023 at 11%; that rate  is expected to decline to 0.7% in 2024. Charlotte, last year’s hottest market, is expected to maintain its steady growth at 1.2%, and Buffalo’s typical home value is expected to decline in 2024 by 0.2%.

Inventory & Velocity

The inflow of new listings in 2023 slowed dramatically from last year, keeping for-sale inventory at multi-year lows. It’s likely that these low inventory markets, in which buyers had the hardest time finding a home and homes generally sold very quickly in 2023, will continue to experience outsized demand (relative to supply) in 2024, compared to other markets. The markets with the fewest listing days per home in 2023 – in other words, where the homes generally sold the fastest – were Hartford, Cincinnati, and Columbus.

Demographics

Baby boomers and millennials represent two enormous generations, and both are very active in the housing market. Baby boomers are hardly exiting the market as they age, a departure from previous generations at the same age, and millennials are aging into their prime home buying years as they hit their early and mid-thirties.

In 2024, only 14 of the 50 largest markets are expected to see homeownership rise. The market with the most lift in the for-sale market is Columbus, with a trend suggesting the formation of 11.4% more owning households (assuming there are homes available for them to buy). Austin and Memphis follow at 9.7% and 9.6% respectively. Of the markets with negative demographic pressure, Birmingham is expected to have the least (-25%), then San Diego (-21.8%), and Oklahoma City (-20.2%).

Of the markets studied, the coolest metro areas of 2024 are expected to include New Orleans, San Antonio, Denver, Houston and Minneapolis. Each of these is characterized by expected annual home value declines, led by New Orleans where Zillow expects the typical home value to fall by 6% in 2024, and by a projected decline in the number of owner-occupied households.

Methodology

The final index was based on the following data:

  • Forecasted annual home value appreciation in Nov. 2024
  • Forecasted acceleration in home value appreciation, Nov. 2023 – Nov. 2024
  • Listing days per home, Jan. 2023 – Nov. 2023
  • Two-year change in total non-farm employment per two-year residential building permit total
  • Projected change in owner-occupied households, 2023 – 2024

Metrics were normalized given the available metro-level data to standard deviations from the mean, with mean and standard deviation weighted based on housing unit counts, and capped at ±1.96 to prevent penalizing any metro for extreme data points. The final index is an average across metrics, with standardized HPA acceleration down-weighted by half.

Inventory and velocity are represented by listing days per home, using published Zillow data for Median Days to Pending and New Listings.

Job market and building data took the ratio of the change in employment to the total permitted residential structures. Total non-farm employment (seasonally adjusted) comes from the U.S. Bureau of Labor Statistics Current Employment Statistics survey. We used the 3-year change in employment Nov. 2020-Nov. 2023.

Building permit data comes from New Private Housing Structures Authorized by Building Permits. We sum over the 2-year period Nov. 2020-Nov. 2023.

To assess the underlying demographic pressure in the for-sale housing market, we used the projected change in homeowner households 2023-2024. This projection accounted for population aging and migration patterns. Data came from the American Community Survey (2021 ACS 5-year sample and 2022 ACS 1-year sample) downloaded from IPUMS USA, University of Minnesota, www.ipums.org.

The first stage uses the larger 5-year sample to calculate entry and exit from the population (due to birth, migration, death) by age. For each birth cohort the age-specific outflow was set to be the difference between the cohort’s population in 2022, less in-migration, and the cohort’s population in 2021. The population inflow and outflow divided by the population in 2021 yields the rate of change entering their 2022 age.

The second stage applies the age-specific rates of population change to the 1-year sample, iterating over 2023-2024. We filtered to ages 18-89 to avoid low population counts and unreliable migration trends at the highest ages. Keeping constant the observed age-specific share of the population who is the head of household of an owner-occupied housing unit (the “owner-headship rate”), we estimate the percentage change in the number of owner-heads expected in 2024, compared to 2023, by age. Summing these changes gave us a demographically expected rate of increase in homeowner households in 2024.

All population and owner-headship counts were smoothed across ages over a 5-year centered window prior to taking rates and changes.

[1] Analysis is applied to the top 50 metropolitan areas by population.

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