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The top 10 hottest housing markets are expected to be spread across the South, Northeast and Midwest this year, according to a Zillow real estate market analysis. But a “hot” market isn’t always ideal for would-be buyers.
Buffalo, New York has reached its peak listas the area is expected to see increased job growth compared to the number of approved building permits for new homes.
“In markets where you’re going to create a ton more jobs than there’s housing supply, you’re likely to see houses move faster, house values go up,” said Orphe Divounguy, senior economist at Zillow.
The list is based on an analysis of home value appreciation, the time it takes to sell a home and employment growth relative to housing supply. This is important information that can help you decide where you want to look for a home — and places you might want to avoid.
What a “hot” market means to buyers
The term “market heat” refers to the level of competition among buyers. When you have more buyers than sellers, you have a hot market, Divounguy said.
“These are areas where competition will be fierce among homebuyers,” he said. “The hottest market does not necessarily mean market health.”
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Market growth in some sectors may not be associated with new jobs.
Florida, for example, is attracting residents looking for warmer, more tax-efficient places to retire, said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.
The claim that “the largest share of homebuyers are baby boomers seeking warmer climates is a trope, but it’s a trope that’s true,” he said. “They are looking for warmer areas, favorable tax conditions and better housing affordability.”
Baby boomers are also the generation that owns most of the wealth, and some of them will be cash buyers as they can leverage their equity.
Where the housing market is cooling
Meanwhile, home values are expected to decline this year in “cooler markets,” or places that will be less competitive. These places are New Orleans. San Antonio? Denver? Houston? and Minneapolis.
“It’s also about affordability; if a market has become less affordable … you probably won’t see that kind of heat in the market,” Divounguy said.
Denver, for example, was a popular draw for homebuyers during the pandemic, but has turned into an area where affordability has been tight.
“Denver had a huge population influx,” Lautz said. “Finding the new Denver will be important to buyers.”
Millennials will also be important buyers. Most are in their prime home buying age and some have reached their maximum earning potential.
Unlike baby boomers who are looking for favorable areas to retire, this group may be looking for employment opportunities or the ability to work remotely in new fields.
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