Midwest and Southern States Dominate the 2026 Housing Affordability Report Card
If you have been following the national housing market, you already know that affordability has been one of the most pressing challenges facing American homebuyers in recent years. Now, a new annual report from Realtor.com puts a letter grade on each state's performance, and the results paint a vivid geographical picture: the Midwest and South are winning, while coastal states continue to struggle. Indiana, Iowa, and South Carolina were the only three states to earn A grades in this year's rankings, and six coastal states received failing scores for the second year in a row.
How Realtor.com Grades Each State
Realtor.com's second annual housing report card evaluates all 50 states across two primary dimensions: housing affordability and home building activity. The affordability component examines metrics such as the share of household income required to cover a typical monthly mortgage payment, the median home price relative to local income levels, and an affordability score that measures how many listings are realistically attainable for households across different income percentiles. The home building activity component looks at construction rates and whether new housing supply is keeping pace with demand.
Together, these metrics produce an overall score that determines each state's final grade. The methodology rewards states that deliver consistently strong performance across every category rather than simply excelling in one area while lagging in another.
Indiana Takes the Top Spot With a Well-Rounded Performance
Indiana emerged as the number one ranked state in this year's report, earning an overall score of 76.3 and jumping from fourth place in the previous year's rankings. Realtor.com described Indiana's secret to success in straightforward terms: the Hoosier State "doesn't dominate any single metric, instead it wins by doing everything well." That kind of balance is harder to achieve than it sounds, and it has clearly resonated with the methodology.
The numbers back it up. Indiana's median home price sits at $295,810, a figure that allows the typical household to dedicate just 28.3% of its monthly income to mortgage payments. That keeps the state comfortably under the widely recognized 30% affordability threshold, the benchmark beyond which housing costs are generally considered a financial burden for households. Indiana also posted an affordability score of 0.89, placing it among the top performers nationwide in terms of how many listings are accessible to buyers at various income levels.
Iowa Holds Strong in Second Place
Iowa, which claimed the top ranking in 2025, slipped to second place this year but remained one of the most affordable housing markets in the entire country. The state recorded an overall score of 75.8 and earned the distinction of having the nation's lowest share of income required to purchase a median-priced home, at just 25.4%. That figure is remarkable in a national environment where many buyers are stretching well beyond their means just to enter the market.
Iowa's affordability score of 0.96 was the highest in the country, meaning that a broad cross-section of households at different income levels can realistically access the local housing market. For first-time buyers, move-up buyers, and even lower-income households, Iowa continues to offer opportunities that are simply unavailable in most other states.
South Carolina Rounds Out the A-Grade Winners
South Carolina joined Indiana and Iowa as one of only three states to earn an A grade this year. The state's performance reflects the broader trend of Southern states benefiting from a combination of relatively lower home prices, growing job markets, and active residential construction that has helped keep supply more in line with demand. South Carolina has attracted significant domestic migration in recent years, and its housing market has responded with enough new inventory to prevent the kind of runaway price growth seen in coastal metros.
Texas also posted a strong showing, earning an A-minus grade. The Lone Star State's combination of aggressive home building and a large, diverse economy has helped maintain relative affordability despite substantial population growth over the past decade.
Coastal States Fail for the Second Year in a Row
At the other end of the spectrum, six states received failing scores: New York, Massachusetts, Rhode Island, Hawaii, California, and Connecticut. New York landed at the very bottom of the rankings with an overall score of just 8.5 and an affordability score of 0.51, reflecting the enormous gap between home prices and typical household incomes in the state's major metro areas.
The fact that all six failing states are coastal is not a coincidence. Coastal housing markets have long been constrained by restrictive zoning laws, limited land availability, high construction costs, and political resistance to new development. These structural barriers make it extremely difficult to build enough new housing to meet demand, which pushes prices higher and keeps affordability out of reach for a growing share of residents.
Oregon, which had failed in 2025, managed to avoid an F this year, but only barely — landing at a D-minus. It is a marginal improvement at best, and the state still has a long road ahead before it can be considered a genuinely affordable market.
The Broader Picture: A Nation Divided by Housing Opportunity
Twenty-six states received C grades in this year's report, and six received D grades, meaning that only a small minority of states are truly delivering for homebuyers. The geographic divide is striking: every state that earned an A or B grade was located in the South or Midwest, while the worst performers were clustered along the coasts.
This divergence carries real consequences for American households. Families in states like Indiana and Iowa can purchase homes while staying within conventional affordability guidelines, building equity and financial stability over time. Meanwhile, households in California, New York, and similar markets face a stark choice between renting indefinitely, relocating, or overextending financially to enter the ownership market.
What These Rankings Mean for Homebuyers and the Housing Industry
For prospective homebuyers, Realtor.com's report card offers a useful high-level framework for evaluating where homeownership remains within reach. States earning A and B grades are not just affordable today — they tend to have the home building activity needed to sustain affordability over time, which matters for long-term investment value.
For the broader housing and mortgage industry, the rankings underscore the urgency of zoning reform, permitting streamlining, and investment in residential construction in underperforming states. Without meaningful policy changes, the gap between the most and least affordable states is likely to widen further, putting homeownership out of reach for an ever-larger share of the American public. The Midwest and South have shown that affordability is achievable — the question is whether other regions have the political will to follow.