States in the U.S. Midwest and South currently offer the highest housing affordability and the most robust new construction activity, according to the 2026 Housing Market Report from Realtor.com. Indiana leads the nation in housing market health, while states in the Northeast and West, led by New York and California, face significant challenges regarding supply and cost.
Which States Rank Highest for Housing?
Indiana holds the top spot in the 2026 rankings with a score of 76.3 out of 100, earning an "A" grade. According to Realtor.com, the state’s success stems from a balance of high construction rates and relative affordability. The median home price in Indiana sits at $295,810, requiring approximately 28% of the median household income, which falls below the traditional 30% affordability benchmark.
Other top-performing states include Iowa and South Carolina, both of which also received an "A." While South Carolina held the top position in the previous year’s report, it remains a leader in balancing new development with accessible pricing. Texas rounds out the top tier with an "A-" grade, supported by a median listing price of $364,749 and a median household income of $76,585.
Why Are Northeast and West Coast Markets Lagging?
The bottom of the rankings is dominated by states in the Northeast and West, where high land costs and restrictive zoning policies continue to suppress new housing supply. New York holds the lowest position in the report, receiving an "F" grade. This ranking is largely driven by a median listing price of $668,173, which significantly outpaces the state’s median household income of $82,657.
Other states receiving an "F" grade include:
- Massachusetts
- Rhode Island
- Hawaii
- California
- Connecticut
According to Realtor.com senior economist Joel Berner, these states struggle because construction costs and limited buildable land prevent developers from delivering housing that middle-income buyers can afford. Unlike the top-ranked states, these markets have seen little improvement in their rankings over the past year.
Trends in Housing Market Shifts
While regional trends remain stable, some states have seen dramatic shifts in their housing health. Delaware and Utah recorded the most significant improvements, each climbing 12 positions in the rankings compared to the previous year. Delaware rose to 7th place, while Utah moved to 17th.
Conversely, some states experienced notable declines. Alabama, Maryland, and New Jersey all saw their rankings drop by eight spots. These shifts highlight the volatility in construction activity, which accounts for half of the report’s scoring methodology, alongside affordability metrics.
Housing Grade Comparison
| State | Grade | Regional Context |
|---|---|---|
| Indiana | A | Midwest |
| Iowa | A | Midwest |
| South Carolina | A | South |
| Texas | A- | South |
| New York | F | Northeast |
| California | F | West |
What This Means for Prospective Homebuyers
The data suggests that buyers seeking more manageable mortgage-to-income ratios are increasingly looking toward the Midwest and South. The report indicates that the "affordability gap" is widening between regions, as states with more flexible zoning and available land are better positioned to meet housing demand. For buyers in high-cost states, the challenge remains the lack of inventory at entry-level price points, a consequence of both high labor costs and regulatory environments that favor luxury development over starter homes.
