The top 5 states leading the ‘two-speed’ housing market

As home shoppers head into the spring buying season, where they live will dictate the median home prices they’ll see.

A recent report by real estate analytics firm Cotality identifies two opposite ends of the spectrum.

“The current data reveals a ‘two-speed’ housing market,” Cotality chief economist Selma Hepp said. “While high-cost coastal and Sun Belt regions undergo price corrections, the Midwest and Northeast are proving remarkably resilient due to their relative affordability and stable employment bases.”

The Northeast and Midwest are currently the nation’s top-performing regions for price appreciation, according to Cotality.

“These states benefit from a combination of factors, including relatively affordable entry points, low inventory levels, and stable employment bases,” Cotality senior principal economist Molly Boesel tells Realtor.com®.

The Midwest market heats up

The Midwest has solidified its position as the nation’s strongest region, boasting an average year-over-year price growth of 3.56%, according to Cotality. 

Illinois, Wisconsin, and Nebraska are driving that strength.

“The Midwest benefits from having a current affordability advantage in many areas,” says Danielle Hale, chief economist of Realtor.com. “Even as home prices rise in the Midwest, they remain lower than in other parts of the country.”

Boesel agrees: “In an environment of high mortgage rates, the value proposition in the Midwest remains attractive to buyers who have been priced out of the West and South.”

Cotality data shows home prices in Illinois are up 4.91% year over year, with a median listing price of $280,000.

“It’s probably the best market we’ve seen in downtown Chicago in five or six years,” Matt Laricy, managing broker at Americorp Real Estate in Chicago, tells Realtor.com. “Many of the people who moved during the [COVID-19] pandemic are coming back home. A lot of people are moving from Florida, saying they’ll take snow over hurricanes any day. The suburbs are getting richer, and the inventory is getting slimmer, so bidding wars are common there.”

Elsewhere in the Midwest, home prices in Wisconsin are up 4.78% year over year, with a median listing price of $370,000.

“Milwaukee is an example of an accelerating market,” says Boesel.

In Nebraska, home prices are up 4.75% year over year, with a median listing price of $335,000.

“The Midwest has strong jobs,” Mitch Coluzzi, co-founder and head of construction at SoldFast, says. “My buddy is moving to the Midwest from California right now, and your money goes a lot further here. Plus, you’ve got the friendliness factor, too.”

The Northeast market bucks the trend

Across the country, prices rose a modest 0.7%. But parts of the Northeast are bucking the broader slowdown.

Cotality reports that New Jersey and Connecticut remain hot—and recorded the highest annual appreciation in the country, both above 5%. 

“This growth is fueled by steady demand around metro areas like Newark and Camden and a shift toward more affordable pockets in smaller markets where supply constraints persist,” says Boesel.

“Newark is insane—it’s like mythic proportions,” says Brendan Da Silva, a Newark real estate agent with Keller Williams. “It’s a hot area—Lionsgate is building a movie studio here. It’s a very competitive market, with lots of bidding wars. I put a Newark house up on the market for $750,000 last week, got seven offers, and the highest was $850,000. It’s not stopping.”

Home prices in New Jersey are up 5.6% year over year, with a median listing price of $519,999.

Home prices in Connecticut are up 5.26% year over year, with a median listing price of $480,000.

“In lower Fairfield County, especially Greenwich and Stamford, the market is still extremely competitive,” Greenwich real estate agent Susan Isaak, of Coldwell Banker, tells Realtor.com. “Inventory remains the biggest driver. In most price points, particularly under $2 million, there isn’t enough supply to meet demand. When a home is priced accurately, we’re still seeing multiple offers, often all cash without contingencies.”

Lack of new construction pushes up prices

The latest Realtor.com New-Construction Insights report shows that all but one of these states see a below-average share of new-construction listings.

“In the exception, Nebraska, even though new construction is more abundant, it commands a hefty 58.5% premium over existing construction,” says Hale. “In other words, the new homes being built are not on par with the existing homes in the market, making them a luxury option rather than a relief valve for the typical buyer in the market.”

The remaining markets on the list tell a similar story, Hale says, with Wisconsin being the one outlier where the typical new-home premium falls short of 50%.

Da Silva says that new development in Newark remains limited, a factor that continues to put upward pressure on resale prices.

“Only 53 newly built homes sold in Newark last year,” he says, “so the market is largely driven by existing properties.”