South, Midwest Outpace Coasts in 2026 Housing Affordability

Regional Divide Deepens With Construction Activity

Globe St’s latest report underscores a widening housing affordability gap across the US, with Southern and Midwestern states extending their dominance for a second straight year. According to Realtor.com, every state earning top marks for affordability and building activity lies in these two regions. In contrast, every state receiving a failing grade was found in the Northeast or West, illustrating an increasingly unbalanced national housing map. The core driver, per Realtor.com, is the South and Midwest’s combination of available land, less restrictive regulations, and higher homebuilding rates—all fueling greater affordability than coastal rivals.

This persistent divergence matters for developers and investors assessing where demand and feasible supply are most aligned. Notably, these affordability trends don’t just reflect home prices, but structural conditions shaping where new projects can actually get built and absorbed by the local market.

The Details

The 2026 analysis reviewed all 50 states and Washington, D.C., grading on both affordability and construction activity. Affordability included the portion of income required for a median-priced home and the share of listings within reach for typical buyers. Building metrics were based on permit activity and how new-home pricing stacks up against existing stock.

Southern states averaged a score of 60.4 and Midwest states 60.9, while Western and Northeastern states trailed at 41.8 and 30, respectively. Thirteen of the South’s 16 states and 10 of the Midwest’s 12 made the top half. Indiana led the nation, vaulting from fourth to first with a $295,810 median home price that eats up just 28.3% of the median household income. South Carolina and North Carolina stood out for high permit-to-population ratios and for delivering new homes cheaper than existing inventory.

Supply Pipeline Concentrates in Growth States

The Southern and Sun Belt states continue to shoulder much of the country’s new housing supply. Seven states—Texas, Florida, California, North Carolina, Georgia, Arizona, and South Carolina—accounted for 51.2% of all residential building permits nationwide, with the Carolinas showing permit-to-population ratios of 1.96 and 1.84, respectively.

By contrast, the most unaffordable states, including New York, Connecticut, California, Hawaii, Massachusetts, and Oregon, have seen little movement in the rankings, largely due to persistent high prices and tight development rules. Notably, New York slid to last place overall. Persistent barriers in these regions—ranging from zoning to land scarcity and construction costs—remain the primary hurdles slowing new supply and driving up prices.

Why It Matters

The South and Midwest’s structural advantages make them magnets for residents and CRE capital. They offer open land, lower building costs, and less red tape. Realtor.com says Indiana, South Carolina, and North Carolina stand out on more than one metric. They combine attainable pricing with sustained new construction. Meanwhile, limited apartment construction in several Midwest metros keeps rental pressure high despite broader regional affordability. In both Carolinas, builders delivered new homes below existing-home prices. South Carolina posted a -5.7% premium, while North Carolina posted -1.5%. That reverses the usual new-construction price bump elsewhere. This shows real pressure release in the hottest inventory pipelines.

In contrast, the coasts remain plagued by chronic undersupply, high regulatory costs, and fierce competition for the limited listings available. The median scoring differential is stark: Midwest states score twice as high as Northeastern ones. As the population continues its post-pandemic drift toward the Sun Belt and affordable metros, CRE professionals are watching whether these state-level divides become more entrenched. Unless restrictive states undertake meaningful zoning and supply-side reforms, capital and population flows will likely keep shifting toward less-constrained markets offering smoother project execution and broader price points.

What’s Next

Realtor.com’s research signals that the regional affordability divide is unlikely to close without substantial policy overhauls in the nation’s costlier states. For now, southern and midwestern markets will likely remain high-priority destinations for new residential development and related CRE investment. Barring sweeping changes to zoning and permitting frameworks in lagging states, the deepening gap in building activity and cost will continue to shape both investor strategies and migration patterns. Commercial players should watch regulatory trends over the next year as a signal for any potential shift—but for now, the momentum remains with the South and Midwest.