Indiana Ranked No. 1 for Homebuilding and Affordability

The Midwest and South continue to outpace the rest of the nation in affordability and new construction, leaving almost all coastal and Western states far behind, according to the 2026 Realtor.com® Housing Report Cards.

“This year’s refresh reveals a familiar regional divide, but also some notable shifts beneath the surface, with a new state at the top of the class and a handful of states whose grades moved dramatically in either direction,” says Realtor.com senior economist Joel Berner.

Indiana clinched the No. 1 spot this year, climbing three spots from last year to earn an A grade and dethrone 2025 leader South Carolina, which slipped to third place.

Across the 50 states and the District of Columbia, none earned an A+ rating, a clear sign that even the strongest markets have room to improve.

Notably, 12 of the 13 states that earned the highest marks, ranging from B- to A, were all clustered in the Midwest and South. Delaware was the lone East Coast state to crack the top 10, capturing the seventh spot.

Mirroring last year’s results, six coastal states earned an F grade, with New York at the bottom of the pile.

How the states are graded

All 50 states and DC are ranked on a 100-point scale based on two equally weighted core categories: housing affordability and homebuilding. 

Affordability, which accounts for half of the score, measures how accessible homeownership is for typical earners. It incorporates the REALTORS® Affordability Score and the share of a state’s median household income required to afford its median-priced home to calculate the financial burden on buyers.

The remaining 50% of the score is determined by homebuilding activity, which assesses whether a state produces enough new homes to meet demand. It is based on the permit-to-population ratio and the new-construction premium—the price gap between purchasing a brand-new home versus an existing home.

Hoosier State takes the crown

Sitting at the top of the leaderboard with an overall score of 76.3 out of 100, Indiana won on the strength of its well-rounded scorecard, balancing formidable affordability with solid homebuilding. 

In the Hoosier State, a median-priced home of $295,810 requires roughly 28% of the median household income of $71,469, safely below the 30% affordability benchmark.

On top of that, the state’s REALTORS® Affordability Score of 0.89 is among the highest in the U.S.

“In Indiana, I think we’ve been fortunate that we’ve, certainly over the long term, been viewed as one of the more affordable places in the country to own a home,” Rick Wajda, CEO of the Indiana Builders Association, tells Realtor.com. “We continue to try to keep the regulatory cost of housing to a minimum and what we can control at the state and local level.”

On the homebuilding side, Indiana has performed well, albeit not spectacularly, with a permit-to-population ratio of 1.02. This means that the state has been issuing new housing permits at a rate that roughly matches its share of the national population.  

Indiana built over 20,000 single-family units in 2025, a massive leap from roughly 12,000 a decade earlier. However, that pace of new construction is still insufficient to erase a massive historic deficit amid an influx of young professionals flocking to the state from nearby markets like Chicago and Louisville, KY, in search of greater affordability. 

“That’s the challenge putting upward pressure on a lot of our communities across the state on pricing, because there’s just not enough units in the ground for consumers to look at,” says Wajda.

He adds that the goal now is to produce more workforce and entry-level housing to meet the growing demand. To that end, the construction industry has been pushing to cut through local red tape regulating minimum lot sizes, minimum square footage requirements, aesthetic standards, and accessory dwelling units.

In April, Indiana Gov. Mike Braun signed into law Housing Bill 1001, aimed at lowering the costs of homeownership by rolling back restrictive local regulations. 

“We’ve been fortunate to have a state government that understands the important role housing plays and the state’s economy,” says Wajda, whose organization lobbied for the passage of the legislation. “We’ve had very strong leadership trying to grow the state’s economy and bring more jobs to the state.”

Wajda also credits the $50 million Residential Infrastructure Fund created in 2023 to help local communities expand the water, sewer, and road networks required to break ground on new developments.

“That has helped bring more housing to the market areas that sorely needed it but maybe didn’t have the ability to extend infrastructure out on their own,” he says.

Other high-achieving states

Two other states earned straight A’s this year: Iowa held steady in second place, and South Carolina dropped to third.

According to Berner, Iowa continues to lead the U.S. in affordability, with the typical household there spending just over a quarter of its median income to pay for a median-priced home—the lowest share across all 50 states and DC. 

Iowa’s two major weaknesses are its subdued permitting activity and a new-construction premium of 56%, signaling that builders are focusing on producing larger, more expensive homes rather than budget-friendly starter inventory. 

Conversely, South Carolina churns out nearly twice as many building permits as its population share would suggest, while its new-construction homes are 5.7% cheaper than existing listings, reflecting a building industry attuned to buyers’ budgets.   

Coming in fourth with a grade of A-, Texas has maintained its position as the champion of homebuilding, issuing nearly 15% of all permits in the U.S. despite holding only a 9.3% population share.

Where Texas falters, however, is affordability. A household here making a median income has to set aside over 32% of its earnings for a median-priced home, pushing it past the affordability benchmark. 

Rounding out the top five for the second year in a row, North Carolina earned a B+, thanks to a winning combination of robust permitting and new homes priced slightly below existing ones. 

North Carolina’s greatest challenge lies in its lack of affordability, with a median-priced home devouring nearly 40% of the median household income. 

Big climbers vs. big decliners

The 2026 housing report card saw several dramatic shifts up and down the rankings. While aggressive construction pushed a few unexpected markets into the top tier, sluggish building activity and elevated prices caused former favorites to lose ground.

Delaware, America’s second-smallest state behind Rhode Island, claimed the title of “most improved,” vaulting 12 spots into seventh place with a B grade and a score of 66.1, largely thanks to its healthy permitting activity, bolstered by a high median income just south of $90,000 that helps buyers absorb the elevated housing costs.

Utah also moved up 12 spots from last year, ranking 17th with a C+ grade. The Western state’s success hinges on its feverish building pace and exceptionally well-priced new homes. At the same time, affordability remains a challenge, with a median listing price approaching $590,000 gobbling up over 42% of the median household income.

“One of the industry’s greatest strengths is its ability to adapt,” Ross Ford, executive officer of the Utah Home Builders Association, tells Realtor.com. “Builders closely monitor market conditions and changing consumer preferences, then adjust their products accordingly. Whether it’s lot size, home design, amenities, or price point, successful builders understand that delivering the right product at the best possible price is essential.”

According to Ross, the greatest hurdle currently facing Utah’s housing market is the regulatory environment at the local level, with builders and developers often facing lengthy approval processes, uncertainty during project review, and increasing costs associated with obtaining permits.

“Every month a project is delayed adds cost, increases risk, and ultimately impacts housing affordability,” warns the executive. “If Utah wants to continue meeting housing demand, finding ways to streamline approvals and improve predictability in the development process will be critical.”

Colorado and Kansas also stood out for their impressive upward mobility, scaling nine and seven spots, respectively, but for different reasons. While pricey Colorado benefits most from its robust building activity, Kansas’ secret weapon is its exceptional affordability.  

On the other side of the spectrum, five states experienced major declines from last year, with Alabama, Maryland, and New Jersey dropping eight spots each, and Louisiana and Wisconsin sliding down seven, with lackluster permitting and building activities emerging as the common denominators.

The bottom of the 2026 list looks painfully familiar, populated by coastal states paralyzed by a toxic mix of high demand, strict zoning laws, scarce land, and sluggish permitting.

New York came dead last, earning an F grade and a dismal score of just 8.5 out of 100 thanks to its staggeringly poor affordability and anemic construction activity.

Fellow flunkers include Massachusetts (No. 50), Rhode Island (No. 49), Hawaii (No. 48), and California (No. 47).