Buffalo, New York, will be 2024’s hottest housing market, according to a recent analysis by Zillow. While you may mainly know Buffalo as the place that regularly gets snowed in during the winter, it turns out that the city’s current combination of affordable homes, a thriving job market, and a multibillion-dollar federal regeneration project has produced market conditions every real estate investor should note.
Zillow’s report uses several metrics to determine which housing markets are currently on the rise. In a nutshell, it looks at two of the most powerful draws for new residents—affordable home prices and the number of new jobs—and then zooms in on how these favorable conditions translate into moving patterns. Once it’s clear that people are actively moving to an area to buy homes and form households, you have yourself a perfect housing hot spot.
Why These Cities?
Unsurprisingly, large and medium-sized cities in the Midwest and the South are taking the lead in the report. In fact, Northeast-located Buffalo is one of the outliers (Providence, Rhode Island, is the other), with most of the list located in Ohio, Florida, and other Midwestern and Southern cities.
If you’ve been following house price indices and housing market trends recently, this will all make sense. The Midwest has steadily been rising as a key region for affordable housing and job growth in the major cities. The South is a bit more uneven in this respect, with some areas much more affordable than others, but it also offers the current cohort of homebuyers something that coastal areas no longer can: the possibility of settling in a prosperous metro area with good housing and good job options.
Anushna Prakash, data scientist for Zillow Economic Research, drives the point home in Zillow’s press release: “Housing markets are healthiest where affordable home prices and strong employment are giving young hopefuls a real shot at buying and starting to build equity.”
What happens when people start moving to an area in larger numbers? Demand and home prices go up unless, of course, new homebuilding keeps up with the increase in demand.
One way to gauge demand is how fast buyers are entering into contracts. Zillow’s analysis considers both its forecast for local home price growth and the speed of buyer-seller housing contracts. Large Ohio cities like Cincinnati and Columbus are seeing particularly high inventory turnover, a reliable indicator that people are choosing to settle there—and they are doing this with speed and determination.
Something a healthy housing market shouldn’t experience, however, is uncontrollable home price growth that quickly makes the area unaffordable. Combined with high mortgage rates, this can translate into demand spiking fast and then decreasing. This has already happened in pandemic-era hot spots like Austin, Texas, which quickly became unaffordable following an unprecedented boom.
Fortunately, it appears that those days of huge spikes and market volatility are largely behind us. Prakash says he is ‘‘cautiously optimistic that the housing market will get back on stable footing in 2024—we shouldn’t see the massive price spikes of the early pandemic or fast-rising mortgage rates of recent years.”
With much-predicted Federal Reserve rate cuts coming at some point in 2024, the housing market should become more favorable for buyers—and, therefore, for investors. An influx of buyers should also boost seller confidence, which could lead to inventory increases. There’s a whole ecology to a thriving housing market, with each element supporting healthy housing turnover.
Of course, affordability will continue to be the major criterion for buyers. Housing is still very expensive across the U.S., and a Zillow study in collaboration with United Van Lines shows that people will move to an area that’s, on average, $7,500 cheaper than where they currently are. This figure shows just how tight finances have gotten for the majority of buyers.
It’s no surprise, then, that Buffalo tops Zillow’s list of 2024’s hottest markets. It has a typical home value of $248,445, $98,970 lower than the national average of $347,415. Perhaps more important, it’s a whopping $202,989 (or 45%) lower than the New York state average home value of $451,434. While Buffalo is not the cheapest location on Zillow’s list, it’s a winner in its region.
Without a doubt, this is the primary factor that’s driving people to Buffalo. There’s more to it than that, though. Buffalo was recently chosen as a federal ‘‘tech hub” under the CHIPS & Science Act. Sen. Chuck Schumer said the designation places the Tri-City region of Buffalo, Rochester, and Syracuse among 31 regions nationwide competing from an initial pool of $500 million in federal funding, with potentially billions of dollars in investment later.
This will almost certainly translate into more employment opportunities. In fact, Buffalo already has the highest number of new jobs per new home permitted of all the locations in Zillow’s report.
Investors mulling over Zillow’s list of hottest housing markets or those researching their own area for the best local markets should use Buffalo’s winning formula as a blueprint. Look for cities with affordable home prices for the region, a buoyant and expanding labor market, and ambitious urban regeneration and/or economic growth plans.