Shift in hottest real estate markets from Sun Belt metropolises to Northeast and Rust Belt regions observed
The US housing market is undergoing a significant shift, with Rust Belt and New England metropolitan areas emerging as the new hotspots in 2025. The Housing Heat Index, a comprehensive ranking system that evaluates home price appreciation, housing availability, market competitiveness, population growth, and labor market health, has revealed this trend.
Cooling Sun Belt Markets
The pandemic boom in Sun Belt metros, such as Cape Coral-Fort Myers, Punta Gorda, Sarasota, Las Vegas, and others, led to a surge in population inflows and housing construction. However, by 2025, new construction outpaced demand in many of these areas, resulting in swelling housing inventories, softer prices, longer selling times, and price reductions. This new supply helps address affordability but dampens price growth and market heat.
Tight Supply and Rising Demand in Rust Belt and New England
In contrast, cities like New Haven (CT), Rockford (IL), York-Hanover (PA), Syracuse (NY), Milwaukee, Chicago, and others in the Rust Belt and Northeast face increasingly tight inventories and rising home prices. These markets saw less new construction historically, so demand growth combined with limited supply is driving strong price appreciation, quick sales, and low inventory relative to population size.
Economic and Job Market Strength
Certain Rust Belt and New England metros are benefiting from solid job markets and demographic stability or growth, supporting sustained housing demand. Charleston-North Charleston, SC stands out as a notable Sun Belt exception maintaining strong fundamentals and housing appreciation due to its job market.
Land Use Regulations and Development Constraints
More restrictive local land use regulations, often linked to higher shares of educated residents, limit housing supply growth in Northeastern and some Rust Belt metros. This exacerbates supply shortages and drives up prices.
Homebuilding Trends
Permitting for new single-family homes has slowed across large metros overall, especially in some Sun Belt cities. However, it has modestly increased in several Rust Belt and Midwest metros like Kansas City, Cincinnati, Pittsburgh, and Oklahoma City. This discrepancy reinforces the varied supply dynamics influencing regional markets.
In summary, the shift from Sun Belt to Rust Belt and New England housing market heat is due to a transition from oversupplied, cooling Sun Belt markets with slowing demand and rising inventories, to undersupplied Rust Belt and Northeast markets with growing demand, tight inventories, economic resilience, and restrictive land use curbing supply.
The Housing Heat Index ranks metropolitan statistical areas based on the factors mentioned above. In cooling markets, home prices are modestly declining, but it may take buyers or sellers to give in to make deals. Tampa-St. Petersburg-Clearwater, FL dropped from the top 5 to the bottom 5 in the Housing Heat Index for 2025. Four of the five coldest housing markets in 2025 are in Florida: Cape Coral-Fort Myers, Punta Gorda, North Port-Sarasota-Bradenton, and Naples-Marco Island.
On the other hand, the hottest housing markets in 2025 are New Haven-Milford, CT, Rockford, IL, Norwich-New London, CT, Charleston-North Charleston, SC, and York-Hanover, PA. Homes in these markets are selling quickly, and housing inventory is slim in comparison to their populations.
Despite price declines in formerly hot markets such as Texas and Florida, economist Lawrence Yun is not concerned, as job growth migration remains strong in many Sun Belt metros.
[1] https://www.realtor.com/news/housing-trends/housing-market-trends-2025/ [2] https://www.realtor.com/news/economy/2022-housing-market-forecast/ [3] https://www.realtor.com/news/housing-trends/hottest-coldest-markets-2025/ [4] https://www.realtor.com/news/housing-trends/housing-supply-curve/ [5] https://www.realtor.com/news/housing-trends/housing-market-trends-2023/
- As mortgage rates rise and investors seek higher returns, some individuals might consider shifting their finance strategies to investing in the real-estate market, focusing on undervalued homes in the Rust Belt and New England regions.
- For those seeking to upgrade their lifestyle and live in a bustling home-and-garden environment, the competition for houses in the Rust Belt and New England metropolitan areas could become challenging due to the limited supply and increasing prices.
- As the focus shifts from the Sun Belt to the Rust Belt and New England, financial institutions can closely monitor the housing market trends in these areas and anticipate adjustments in their lending strategies accordingly, ensuring optimal service to their clients in the evolving landscape.
