Saw this originally on Red State but it's originally from Realtor.com. To no one's surprise the most affordable states are all Red States, and the most expensive states are all Blue States. No wonder the Red States are gaining in population - while the Blue States are losing population!
Highlighted findings
- States in the South and Midwest lead the nation in terms of current housing affordability.
- Southern and Western states are building the most homes, with just seven states from these two regions accounting for over half of the permits issued for new-home construction in 2024.
- We assigned letter grades to measure housing provision based on current affordability and current construction, as a proxy for future affordability. With this approach, no state received an A+, and only one A and two A- final grades were given out, as all 50 states and DC have room for improvement.
- States in the South and Midwest received all of the good grades given out (A’s and B’s) on the basis of affordability and homebuilding; states in the West and Northeast, with generally stricter zoning and land use regulations, received all of the bad grades (D’s and F’s).
Realtor.com is committed to expanding the national conversation about affordable housing. Our Let America Build campaign is designed to showcase the problems facing prospective homebuyers and encourage leaders of governments and communities to address these challenges by facilitating the building of affordable homes. It will be a long, uphill battle to close the 4 million home supply gap the United States is currently facing, and we showed that the size of the challenge and progress toward closing the gap vary across different regions of the United States. Thus, we know it’s important to check in on how states and locales are performing. Is your state top of the class? Find out in the interactive map below.
Earlier this year, Realtor.com announced that our headquarters were now proudly in Austin, TX, and we produced the Texas State of Real Estate report to celebrate. Not wanting to leave the other 49 and DC out of the fun, we decided to grade all of them as well in terms of how well they’re addressing housing affordability and homebuilding. Each grade reflects something real—families trying to stay close to work, care for parents, or finally afford a home of their own.
It has become harder and harder to become a homeowner, with high prices and mortgage rates remaining the unfortunate reality, and increasing the supply of homes is the clear solution. States have a clear mandate to address housing affordability, so we are assigning grades based on how they are doing now and how well they are addressing the future by building affordable homes. Our score is a weighted average of percentile ranks across two affordability metrics and two new construction metrics:
- REALTORS® Affordability Score: 25%
- Median earner’s share of income spent on median-priced listing (ranked low to high): 25%
- Permit-to-population ratio: 40%
- New-construction premium (ranked low to high): 10%
After applying a curve to the distribution of scores, we assign letter grades according to the following table.
Grade Score Grade Score A+ 77.5+ C+ 57.5-60 A 72.5-77.5 C 47.5-57.5 A- 70-72.5 C- 40-47.5 B+ 67.5-70 D+ 37.5-40 B 62.5-67.5 D 32.5-37.5 B- 60-62.5 D- 30-32.5 F 0-30
Affordability criteria
We consider two correlated but distinct metrics for home ownership affordability in each state. The first is our REALTORS® Affordability Score, which can be explored here for data at a metro level. We calculate the score at the state level for the entire year of 2024, identifying what percentage of for-sale inventory in each state is affordable to households at varying points along the income distribution in that same state. The benefit of using the REALTORS® Affordability Score is that it measures housing affordability across the income spectrum. The score can range from 0 to 2, and a higher value indicates a more affordable market. Unfortunately, all 50 states and Washington, DC, score lower than 1 in this metric; Iowa comes in on top, at 0.92, and Montana is in last place, at 0.4.
Instead of “how much of the market in this state is affordable to households across the income spectrum,” our second affordability criterion seeks to answer “how affordable is the median home listing to the median-earning household in this state?” This is a simpler calculation that allows for more focus on the middle of the market and gives useful context to the often-reported stats on median household income and median list price.
As a general rule, we say that a home is affordable if the mortgage payment on it makes up 30% or less of a household’s monthly income. For each state, we calculate how much of the median household earnings would be spent on a mortgage on the median-priced home listing from 2024, assuming a 10% down payment and a mortgage rate of 6.75%. Just 18 states, primarily in the Midwest and South, can claim that their median home is affordable for their median earner by our 30% rule. Once housing eats up more than a third of your paycheck, it’s not just expensive—it also puts real pressure on everything else in life.
To produce a final affordability score, we simply average the percentage rankings for both metrics across the states and multiply by 100. This leaves us with a score out of 100 for current affordability, which can be seen below.
Final grades: There’s room for improvement everywhere
To compute a final grade out of 100, we simply average the affordability score with the homebuilding score, giving each subtotal equal weighting. This gives us a balanced view into current affordability in each state and what we can expect in terms of supply growth there.
There were no A+’s given, which says a lot about how far we still have to go to make homeownership truly attainable. South Carolina scored the highest of any state with an A, primarily due to top-notch homebuilding scores, and despite a middle-of-the-pack affordability score. Iowa and Texas both got A-’s, but in very different ways. Iowa dominated our affordability criteria but had a weaker showing in terms of new construction, while Texas’ strong permit-to-population ratio and Iowa’s new-construction premium helped it to overcome some current affordability issues.
B’s (plus and minus included) were distributed exclusively to states in the South and Midwest as well, where construction activity and stronger affordability metrics are concentrated, respectively. D’s and F’s went only to Western and Northeastern states. Affordability remains a major challenge on the Pacific and Atlantic coasts and in states like Montana, which are seeing a major influx of migration from more expensive coastal markets.
States that received high marks could be targets for prospective first-time homebuyers looking to find a listing that meets their needs and their budget. Many of these have higher concentrations of affordable new builds on the market that offer incentives like mortgage rate buydowns to make monthly payments even more manageable. States getting bad grades may be places where homeownership is a difficult goal to attain, at least for now. The path to owning a home in these states may be longer, and may include longer periods of renting, which has fortunately become more affordable on a year-over-year basis for 20 consecutive months. Housing is local by nature, as evidenced by the variety of outcomes we show across states here, but it will take a nationwide effort to advance homebuilding and improve affordability.
In the interactive map below, you can see each state’s grade and the factors that went into it.
Distribution by Region
Midwest Northeast South West A 1 2 B 4 6 C 7 5 9 9 D 1 F 4 3 12 9 17 13
Again, via Red State but it's originally from Realtor.com.
1 comment:
Great read, thanks for sharing.
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