America’s housing market just got its report card, and it’s one that’s best jammed in the bottom of a backpack rather than pinned on a fridge. Six states failed. Only four earned an A. And this year’s valedictorian—Indiana—leapfrogged out of last year’s B-average anonymity to clinch the top spot.

Realtor.com based its annual rankings on two things: affordability and supply growth. Indiana aced the former, with homes priced at a median of $295,810, just 28.3% of the state’s median household income. Homes are also being built in Indy at a pace roughly proportional to its population.

Meanwhile, salutatorian Iowa boasts the lowest income share to buy a home, at 25.4%. South Carolina is overbuilding and underselling, cranking out nearly double its population’s worth of new homes and then pricing them below older properties. And then there’s Texas, which led the pack in raw construction volume, accounting for 14.6% of all permits nationwide.

What the top four states have in common: They build more, regulate less, and deliver homes people can afford. Class dismissed.

States that flunked

Finishing at the very bottom of the class is New York, where homes cost $668,173 (over 55% of the median income) and building permits meet only half of what the state’s population needs. Massachusetts, Rhode Island, Hawaii, California, and Connecticut also failed for the usual reasons: too little land, too much red tape, and high construction costs that become the buyers’ problem.

The grades break down pretty cleanly by region: All A’s and B’s belong to the South or the Midwest; all six F’s lie in the Northeast and the West. Still, what counts as a “good” or “bad” grade will depend on whether you’re trying to buy, sell, renovate, or rent out your place.

“Investors [may want] to read these report cards backward,” says Joel Berner, a Realtor.com senior economist. “Low-scoring states like New York and Massachusetts have low rates of homebuilding relative to their population, which keeps renters renting longer. These states are good places to be a landlord.” Meanwhile, he says, flippers will excel in states with high construction premiums like Iowa, where new homes cost 56% more than old ones and “there is ample opportunity for flippers to renovate homes with [a high] return on investment.”

Consider this your hall pass to shop somewhere new. Nicholas Fernandes of Bright Bloom Real Estate lives in Massachusetts, but got interested in the Hoosier State during a layover at the Indianapolis airport on Christmas. “Indianapolis surprised me: clean, organized, growing,” he recalls. “When I got home, I ran the numbers.” At age 27, Fernandes bought his first investment property in Indy for $167,000. “That property is now one of four I own in the area,” he says. “My grandpa always told me to look at the numbers. In Indiana, the numbers work.”

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At 24, Isaac French bought five muddy acres for $133,000 near his home in Waco, TX. In 10 months, he transformed it into travel’s next big thing: a “micro-resort.” He says his seven tiny cabins at Live Oak Lake beat massive hotels as an investment any day.

Q: What inspired you to build your first micro-resort? “I was working as a bookkeeper and deeply dissatisfied. So I started looking for land. One morning I opened Zillow for the hundredth time and saw a listing down the road. I called the Realtor; an hour later I was standing on five acres with a swampy pond that I’d driven past dozens of times without a second thought. But I could immediately visualize what it could be. I got chills. I put it under contract that day. Within a year, we’d spent $2.3 million to build a seven-cabin micro-resort.”

Q: What is a micro-resort, and why is it a viable business model? “It’s a 5- to 25-unit hospitality property that’s nature- and experience-driven, lightly staffed, and uses social media to drive direct bookings rather than relying on third-party platforms that have been flooded with large-scale portfolio managers that, frankly, have no heart or soul. Micro-resorts are trying to build on what made Airbnb compelling in the first place—novelty, authenticity—and add a communal layer that today’s travelers are hungry for. These properties are great for families, friend groups, and corporate offsites. But more than anything, they have a story.”

Q: You were suspended by Airbnb. Why? “Airbnb suspended us due to a system glitch two weeks after launch. I was stranded with no income and loan payments coming up. Then I got a message from a travel influencer on Instagram, where I’d posted a few photos to barely 200 followers. She wanted to feature the property; I Venmo’d her $950 to post some photos. Within seven days, we had thousands of new followers and $40,000 in bookings. What almost destroyed us became our biggest breakthrough. It forced us to go direct, which turned out to be the final piece of the business model I hadn’t originally planned for.”

Q: What’s your advice for investors who want to build a micro-resort? “Build fewer units and spend more time, money, and care on each. Everyone is obsessed with scale, but the real opportunity is going smaller. It’s counterintuitive, but financially, it’s not just about lower operating complexity. The bigger thing is that it’s much easier to hit 90%+ occupancy when you have one truly singular place. We averaged 94% occupancy our first year. That demand exists because we tapped into FOMO and created a lot of urgency just by making it exclusive. Social media and giveaways are multipliers, but they can’t replace a genuinely one-of-a-kind property. You’ve got to build something great first.”

Click here to learn more about how to build your own micro-resort.

Boston resident Nicholas Fernandes of Bright Bloom Real Estate owns four properties in Indianapolis. Here’s why he looked beyond his own backyard.

Average home price: $233,674 (down 0.2% YoY)
Homes that sell over list price: 18.0%
Homes that sell under list price: 58.2%
Average rent: $1,413/month

The pros: “Indianapolis sits in that sweet spot between affordability and stability,” says Fernandes. “Beyond just low cost, what stands out is consistent rental demand driven by a steady job base, healthcare, logistics, and education, which keep occupancy stable compared to more volatile markets. We also see solid rent-to-price ratios, which make it attractive for investors focused on cash flow.”

The cons: “Unless you’re adding value, appreciation is typically slower here than in coastal areas, so it’s not a rapid flip environment,” he says. “Plus some suburban neighborhoods have pockets of overbuilding, so hyper-local information is crucial because purchasing on the wrong block can completely alter the outcome.”

His advice: “The biggest lesson for me was about geographic humility: Just because a market isn’t glamorous doesn’t mean the numbers don’t work,” he says. “Boston, where I live, is where I wanted to buy. But the numbers didn’t work for me there. Indianapolis did.” Another tip? Even though homes here may be cheap, “Don’t naively pursue ‘cheap’ transactions,” he warns. “In Indianapolis, the opportunity lies not in speculation but in prudent purchasing and management. It does very well if you approach it like a long-term yield play and concentrate on fundamentals.”

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