the hottest U.S. housing markets
/
By Patrick S. Duffy | Published on March 25, 2025
With inflation through February slowly heading in the right direction and 30-year fixed mortgage rates recently settling in at about 6.7%, hopeful homebuyers are slowly edging back into the housing market. But is it enough to unlock a semifrozen housing market?
The good news is that according to Freddie Mac, applications for mortgage purchase loans were up 5% year-over-year through mid-March. At the same time, with stock markets in flux and consumer sentiment dipping sharply in recent weeks, if concerns about rebounding inflation and job security continue to build, that could prompt some buyers to wait for more certainty.
Still, even if consumers hold back on high-ticket items such as new cars, trips and electronics, the stability of owning one's own home is a powerful motivator to take the plunge into the housing market – especially if it's relatively affordable, such as in the hottest housing market for January.
Since the metrics for local housing markets will not be equal for each region, state or city, it's important for buyers and sellers to do their research,orank their must-haves and find the best agents for their situations.
Our analysis of the hottest housing markets pulls from the U.S. News Housing Market Index, which incorporates a wide array of data points and provides a simple yet comprehensive way to rank the covered metropolitan statistical areas (MSAs) from frigid to balmy on a scale of 1-100. This particular ranking is based on data from January 2025.
Hottest Markets Overall
Although the hottest MSA scores ranged up to 76.2, there were lower-scoring MSAs under 50, including Boston, Sacramento and two markets in Florida. At the top of the spectrum, the following MSAs are the hottest housing markets ranked from first to fifth:
Omaha, Nebraska – 76.2
Austin, Texas – 72.3
Houston – 72.1
Charleston, South Carolina – 71.6
Denver – 71.5
Given a tightening job market with employers regaining the balance of power, working remotely full time is much less of a consideration for today's homebuyers. As a result, the metrics that define a relatively hot housing market are returning to the traditional basics of local demand, supply and financial considerations. Whether in Nebraska or South Carolina, what these hottest markets seem to share are big-city amenities without the high housing costs of MSAs closer to the megacities along the West and East coasts.
The Hottest MSA Overall: Omaha, Nebraska
The Omaha, Nebraska, MSA offers a mix of strengths, including positive job growth thanks in large part to robust economic development activities, a lower unemployment rate versus the overall U.S., a reduced cost of living compared with many large metro areas and a practical process to encourage new housing developments at a lesser risk to homebuilders.
"We have something for anyone, including urban vibrancy, great suburban neighborhoods, historic neighborhoods with character and family dynamics and tranquil spaces as well," says Alec Gorynski, senior vice president of economic development for the Greater Omaha Chamber of Commerce. With the region just crossing over the one million population threshold and jobs growing at a healthy clip, Gorynski is not surprised by Omaha's top ranking.
On the economic front, Gorynski notes that besides a low unemployment rate, Omaha's labor participation rate of nearly 67% compares favorably with a national rate of just over 62%, which keeps the chamber quite busy given that their workforce extend far beyond the city's borders. As he explains, the Greater Omaha economic development partnership extends across eight counties to include a much broader labor shed with various employment centers, adding, "It's much better to collaborate than compete with each other."
The larger challenge for the chamber's economic development team, which is funded by the city of Omaha as well as private sector firms and individuals, is recruiting new employers and people to the area while also retaining those who might otherwise depart to other states.
"We're working to grow the economy with some strong industries with a diverse employment base," notes Gorynski. "This lends itself to economic resiliency, so we're not overly dependent on one industry, which makes it smoother for us versus the rest of the country."
The overall Housing Market Index score of 76.2 for the Omaha MSA rose 0.7 points year-over-year through January and compares with 75.5 in January 2024. At the same time, the overall HMI for the United States fell by -0.8 points to 66.6. Notably, when compared with that of the overall U.S., the HMI in Omaha has consistently ranked higher since December 2019.
The three subindexes covering demand, supply and financial factors for January are also calculated on the same scale of 1-100.
Demand HMI – 82.3 (80.7 in June 2024)
Supply HMI – 51.4 (45.2 in June 2024)
Financial HMI – 94.9 (95.4 in June 2024)
During the 12-month period ending December 2024, the Omaha MSA gained more than 12,000 nonfarm jobs, for a growth rate of about 2.4%. According to the Bureau of Labor Statistics, the highest percentage of increases in job categories include information, education and health services and leisure and hospitality. Omaha’s unemployment rate in December was just 2.8% versus 4.1% for the overall U.S.
As urban areas of north and south Omaha continue to redevelop with new apartments and a few smaller developments with single-family homes for sale, the overall mix of building permits in the greater Omaha MSA has meant a higher average share for multifamily units over the past year, rising by several percentage points to 41% versus 32% in 2018. Looking ahead to our building permit forecasts to the middle of 2025, look for the mix of single-family to multifamily permits to average about 56% and 44% of the total, or approximately 310 and 240 units per month, respectively.
Since hitting a record high of $325,000 in June, the median home sales price in Omaha has fallen to $304,000. Still, home prices here rose 4.8% year-over-year versus a national rise of 4.2% to $419,000, or 38% higher than in Omaha.
Last June, the Omaha MSA had under 1.2 months of supply, making for an unusually tight seller’s market. Since then, while the supply has varied month to month, ultimately rising to 2.2 months, it’s still much lower than the national average of 3.6 months. In general, if a healthy supply timeline ranges from four to six months, it’s possible that more buyers will look for new home alternatives in Omaha versus the low supply of existing homes.
Fortunately, the area is also home to several local builders as well as national leader D.R. Horton to provide more supply. According to the Great Plains Regional MLS for the Omaha Area Region, over the 12-month period ending in January, newly built homes made up almost 48% of unsold inventory, 19% of new listings and 16% of closed sales. Those new homes also come at a higher cost, with an average premium of nearly 44% over existing homes.
One of the reasons that the greater Omaha area is able to continue building new homes is Nebraska's unique use of Sanitary and Improvement Districts. Created when a developer buys land to build homes, the SID can issue bonds to fund the development of infrastructure such as streets, sewers and utility lines in addition to buying land for public parks and then levy taxes and special assessments on homeowners. Developed after World War II to speed up the building of new homes for returning soldiers, Gorynski says that typically the city will annex the SID after 12 to 15 years.
For Marc Stodola, a 30-year veteran of building homes and owner and president of Charleston Homes, the SID helps builders to better survive the ebbs and flows of housing development. "It allows developers to develop more land and bring lots online because it's less out of pocket for them out front," he says. "Eventually the developer will pay for those, but they don't have to pay up front." In addition, Stodola tends to start new homes only after they've been sold in order to avoid the "red tag" discounts for completed but unsold homes he sometimes sees in other communities.
Established in 2007, Charleston Homes is local to greater Omaha and builds a variety of semicustom home models in various new home lot communities on the outskirts of the metro area. Allowing buyers to choose from options including finished basements and various garages sizes as well as upgrades at the design center, Stodola says the price point for his homes can vary widely from $350,000 to $600,000. This appeals to a variety of first-time, move-up and even some move-down buyers.
Calling Omaha a "big small town," Stodola thinks what sets his company apart are compelling value, long-standing relationships with local real estate agents as well as offering his own in-house warranty versus the 2-10 home builders warranty offered by most larger builders. Besides offering faster response times, the lead of his in-house warranty team also reports directly to him, which can uncover potential production problems early.
As for working with real estate agents, Stodola thinks they're vital, with 80% of their sales coming through buyers' agents. Whereas some national builders sometimes shift their commission rates depending on the strength of the market – which can alienate agents – Charleston Homes prefers to hold these rates steady.
Jessica Sawyer, 2025 president of the Omaha Area Board of Realtors, an active participant with state and national Realtor groups and agent with Nebraska Realty, agrees that agents play an important role in new home sales and that Charleston Homes is "great to work with."
"I think we've caught up with our frenzy of new construction builds after two years of putting something new up, and now we have more inventory and spec homes hitting the market," she says. Although agents still need to be sure to register their clients on the first visit to a new home sales office, Sawyer notes that the new industry rules requiring buyers to sign a contract with an agent prior to viewing any listings have cut down on miscommunications.
As for the overall market, she says that while buyers are getting used to higher mortgage rates, rising home prices make it difficult for first-time purchases, and listings priced above $500,000 are new for the area. In addition, while the area has always had relatively high property taxes to fund schools and streets, premiums for homeowners insurance in the Midwest are also rising quickly due to threats including tornadoes, fires and floods.
Given the increase in home prices, it's not surprising to also see the median rent in Omaha surging 4.3% year-over-year to $1,348 per month. Even with this increase, however, the median rent is over 30% lower than the national level of $1,968. Still, even with the boost in supply of more multifamily units in Omaha, by the fourth quarter of 2024, rental vacancy levels here fell by 1.5 percentage points year-over-year to 5.6%.
Besides being below the national vacancy rate of 6.9%, if 5.0% traditionally marks the equilibrium level for rental supply and demand, for now Omaha’s vacancy rate slightly favors landlords – but not by much.
In December, although the rate of mortgage delinquencies in the Omaha MSA of 3.3% edged up 0.2% year-over-year, it remains lower than the national rate of 3.5%. Similarly, while the rate of local foreclosures was flat at 0.2%, it is also lower than the national average of 0.3%.
Read Full Article on US News Real Estate