For the second consecutive year, the nation's housing affordability map is being defined by a growing regional divide, with Southern and Midwestern states continuing to outperform much of the Northeast and West thanks to stronger homebuilding activity, more available land and fewer development constraints.
A new report by Realtor.com finds that every state earning an A or B grade was located in either the South or Midwest, while all six states receiving failing grades were found in the Northeast or West.
"This year's update tells a consistent but increasingly urgent story," Realtor.com said. "The structural advantages that make the South and Midwest more affordable, such as available land, lower regulatory barriers, and relatively strong building activity, continue to set those regions apart."
The report evaluated all 50 states and Washington, D.C., using measures of both housing affordability and homebuilding activity. Affordability metrics included the share of income needed to purchase a median-priced home and the portion of listings affordable to households at different income levels. Homebuilding scores were based on building permit activity and how competitively priced newly constructed homes are relative to existing housing stock.
Southern states averaged a score of 60.4, while Midwestern states averaged 60.9. Western states averaged just 41.8 and Northeastern states averaged 30.
Thirteen of the South's 16 states ranked in the top half of the report, while 10 of the Midwest's 12 states landed among the top 30.
Indiana emerged as the highest-ranked state overall, moving from fourth place last year to first place in 2026. The state earned top marks through a combination of affordability and steady construction activity rather than excelling in a single category. Its median-priced home of $295,810 requires just 28.3% of median household income, below the commonly used 30% affordability threshold.
Other top-ranked states included Iowa, South Carolina, Texas and North Carolina.
South Carolina and North Carolina stood out for their construction activity. South Carolina's permit-to-population ratio of 1.96 means it is producing nearly twice as many building permits as its share of the population would suggest. North Carolina posted a similarly strong ratio of 1.84.
Both states also featured a rare characteristic in today's housing market: newly built homes were actually cheaper than existing homes. Realtor.com found new-construction premiums of negative 5.7% in South Carolina and negative 1.5% in North Carolina, indicating builders are delivering competitively priced inventory rather than focusing solely on higher-end housing.
The report found that a small group of fast-growing states continues to carry much of the nation's homebuilding load. Texas, Florida, California, North Carolina, Georgia, Arizona and South Carolina accounted for 51.2% of all residential building permits issued nationwide.
Meanwhile, many states at the bottom of the rankings remained unchanged from a year ago.
Connecticut, California, Hawaii, Massachusetts and Oregon all held the same positions as last year's report, while New York fell two spots to last place. Realtor.com attributed the poor performance of many lower-ranked states to structural challenges, including high home prices, limited land availability, restrictive zoning rules and elevated construction costs. The report argues that without significant policy changes, the affordability gap between regions is likely to continue widening.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.