S.F. didn’t make Zillow’s list of hottest markets

Zillow’s predictions for the hottest real estate markets in 2026 are out, and the San Francisco metropolitan area ranks low on the list.

That could be good news for buyers in San Francisco, where a boom in artificial intelligence has sparked bidding wars in parts of the city. Even more surprising, the San Jose area ranks far above its neighbors, ranking fifth among the 50 largest metropolitan areas in the United States.

The San Jose metropolitan area and the Los Angeles area, comprised of Santa Clara and San Benito counties, were the only West Coast regions to crack the top 10. The San Francisco region, which includes Marin, San Mateo and Alameda counties, ranked 38th.

Top market? Most are not coastal metropolises or sunbelt resorts. Instead, the list includes some of the snowiest and more depressed places in the country: Buffalo, N.Y., Hartford, Conn., and Milwaukee, among others.

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To be sure, both San Jose and San Francisco have jumped significantly in the rankings since last year, when they were near the bottom. Zillow’s annual rankings are based on more than just price growth. Rather, it is intended to indicate which markets are likely to be most competitive among buyers.

Affordability is a big part of this competition, which helps explain why seven of the ten hottest metro areas are in the relatively affordable interior Northeast. Buyers can purchase four homes in Hartford, CT for the price of a typical home in the San Jose area. This means there is a larger pool of potential buyers in these northeastern suburbs, whereas buying in San Francisco or San Jose is typically only for wealthy families.

What’s more, both the West Coast and the Northeast are facing shortages of housing inventory, but unlike California, the Northeast is home to many relatively affordable metropolitan areas not far from big cities like Boston and New York, Zillow senior economist Kara Ng said. By contrast, supply in California’s coastal metropolitan areas is severely tight, driving up prices, fierce competition, and few alternative refuges outside of Central Valley cities. California families struggling to find something within their budget often have to leave the state entirely.

Finally, high mortgage rates have also depleted inventory across the U.S., with many would-be sellers unwilling to give up low rates and move.

Even so, for reasons that are not entirely clear, inventory declines in the Northeast have been much greater than in California, Wu said. In the San Francisco metro area, listings are roughly back to pre-pandemic levels.

As a result, Zillow expects home prices to soar in the Northeast this year. Adjusted for inflation, home prices in the San Francisco metro area are actually below pre-pandemic levels, and the company expects them to fall further through the end of 2026.

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Another reason San Francisco ranks so low: Competition for housing can depend on the city or even the neighborhood. While sales are heating up in the city of San Francisco, cooler markets in the East Bay and Marin County may make the San Francisco metro area seem lukewarm.

“There are buyers who are just competing for junk,” said Mary Macpherson, founder of Vantage Realty in San Francisco. While she was surprised that San Francisco didn’t rank high on Zillow’s list, she noted that the local market has only recently begun to heat up.

Zillow’s forecasts have been off the mark before. The company expects home prices to drop significantly in the San Jose metro area in 2023. Instead, they rose to all-time highs.

Since then, the South Bay has cooled down. Sandy Jamison, a real estate agent with Tuscana Properties in Campbell, said layoffs at technology companies continue to unsettle buyers. Trump administration policies have also disrupted the market, with visa holders reluctant to buy homes and cuts in housing aid forcing some renters to move to more affordable areas.

“I think San Jose is hot because supply continues to be constrained, not necessarily because demand is exploding,” Jamison said.

This article was originally published on San Francisco didn’t make Zillow’s hottest markets list, but part of the Bay Area did.