America’s housing report card is out

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 Fs 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.”