Buyer’s or seller’s housing market? Zillow’s updated regional ratings for over 400 markets

Want more housing market stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the ResiClub newsletter.

Zillow economists use an economic model they call the Zillow Market Heat Index to gauge the competitiveness of housing markets across the country. This model looks at key indicators—including home price changes, inventory levels, and days on market—to generate a score showing whether a market favors sellers or buyers. 

Higher scores point to hotter, seller-friendly metro housing markets. Lower scores signal cooler markets where buyers hold more negotiating power.

According to Zillow: 

• Score of 70 or higher = strong seller’s market
• Score from 55 to 69 = seller’s market
• Score from 45 to 54 = neutral market
• Score from 28 to 44 = buyer’s market
• Score of 27 or below = strong buyer’s market

The Zillow model shows that, directionally speaking, U.S. homebuyers have been gaining power since the pandemic housing boom fizzled out in mid 2022. 

Does ResiClub agree with Zillow’s assessment?

Directionally, I believe Zillow has correctly identified many regional housing markets where buyers have gained the most power—particularly around the Gulf—as well as markets where sellers have maintained (relatively speaking) somewhat of a grip, including large portions of the Northeast.

Based on my personal housing analysis, I consider Southwest Florida to be the weakest/softest chunk of the U.S. housing market this year. Not too far behind are pockets of Texas and Colorado—which have also seen a bigger build-up in resale inventory and unsold new-build spec inventory over the past three years.

In my view, much of the Midwest is a little tighter than Zillow’s model suggests. 

Additionally, in my view, many West Coast markets are softer than Zillow’s analysis suggests—in particular the areas that have recently seen big jumps in active inventory for sale—while some areas in the Midwest are a little tighter than Zillow suggests.

One more thought: The Zillow Market Heat Index should not be the only metric that housing stakeholders look at when assessing market temperature. At a minimum, I’d also recommend looking at the speed of active inventory change, active inventory now versus the same month in 2019, year-over-year home price change, and seasonally adjusted month-over-month home price change. All of those metrics can be found in the ResiClub Terminal, down to the zip code level.

Another thing to keep in mind: Today’s housing market is far softer than the overheated housing market during the pandemic housing boom. Below is Zillow’s assessment back in December 2021.