Housing Affordability Across America: A Tale of Two Halves
Leading real estate platform, Realtor.com, has identified these specific states as top performers in the housing market.
Realtor.com CEO Damian Eales spilled the beans on America's housing affordability during an appearance on 'Mornings with Maria.'
The housing market across the nation shows a stark contrast, according to a new report from Realtor.com. Some states are thriving while others are struggling to keep up.
In its "Grading the States: Affordability & Homebuilding Report Cards" report, Realtor.com gave letter grades to 51 U.S. states and Washington, D.C. Only three earned an A.
The report focused on "housing affordability and the ability to meet future supply challenges through new construction" to rate the states.
Where the Magic Happens
Top-ranked South Carolina and fourth place Iowa take the crown for their stellar efforts in homebuilding and affordability. South Carolina's A grade was the sole "A" for affordability and homebuilding, while Iowa boasted the highest Realtors Affordability Score at 0.92 out of 2.
The report credited Texas and Indiana (A- and B respectively) to "impressive new construction" and "proactive homebuilding efforts." North Carolina rounds off the top 5 with "strong affordability and homebuilding activity."
A Bad Hand Dealt, Unplayable?
Regrettably, the largest share of states fell within the C-range for affordability and homebuilding. The key takeaway: affordability issues and sluggish construction are the norm rather than the exception.
The South and Midwest claim the B range, while the D-grade is held by Montana. Seven states (Oregon, Connecticut, California, Hawaii, New York, Massachusetts, and Rhode Island) received an 'F' for affordability and homebuilding in Realtor.com's report.
How We Got Here
The affordability disparities across U.S. states are the result of several key factors:
- Regional Differences in Land Availability and Costs: The South and Midwest lead the pack due to ample land and lower land costs, enabling more new construction. In contrast, densely populated regions face limited land availability, driving up prices and slowing development.
- Construction Permit Concentration: Seven states—Texas, Florida, California, North Carolina, Georgia, Arizona, and South Carolina—account for over 50% of national construction permits, reflecting pro-growth policies and streamlined approval processes.
- Income-to-Home Price Imbalance: Only 18 states have median-priced homes affordable to median earners under the 30% income rule. In high-cost states, home prices have risen twice as fast as incomes, pricing out middle-income buyers.
- Regulatory and Legal Barriers: Delays in regulatory approvals disproportionately hinder construction, particularly in states like New Jersey. Even in states with strong construction activity, local zoning restrictions often limit density.
- Labor Market and Economic Factors: States with strong job growth face pressure to build housing for incoming workers, while areas with stagnant labor markets struggle to justify new projects. This creates a feedback loop: affordable housing shortages reduce labor mobility, exacerbating regional economic disparities.
Closing the 4 million-unit national supply gap requires addressing regulatory bottlenecks and incentivizing public-private partnerships in high-demand regions.
- Realtors across the nation are investing in real estate markets, particularly in South Carolina and Iowa, which were top-ranked for their efforts in homebuilding and affordability.
- Capital is flowing into states with more affordable housing and active homebuilding, such as Texas, Indiana, and North Carolina, due to their impressive new construction and proactive homebuilding efforts.
- The finance industry is focusing on states with sluggish construction and affordability issues, as the largest share of states falls within the C-range for affordability and homebuilding.
- Online platforms like Realtor.com are grading each state's housing market based on factors such as land availability, construction permits, income-to-home price balance, regulatory barriers, labor market, and economic factors.
- To close the 4 million-unit national supply gap in the housing market, it is crucial for policymakers and realtors to collaborate and address regulatory bottlenecks, incentivize public-private partnerships, and create a more favorable environment for affordable housing and homebuilding in high-demand regions.
