Has South Dakota Lost Its Housing Affordability Advantage?
For many years, South Dakota has been viewed as a relatively affordable place to buy a home, particularly for first-time buyers and potential in-migrants, especially compared to more populous states in the Upper Midwest. That perception is now in question.
In 2018, the median listing price in South Dakota was about $296,000 in 2025 dollars. That was well below Minnesota, where the median price was about $362,000. It was close to Nebraska, at roughly $299,000 and slightly below North Dakota, at about $301,000. Only Iowa was clearly less expensive, with a median price near $256,000.
Those price differences mattered. Lower prices, combined with more moderate borrowing levels, made home ownership more accessible for many households in South Dakota. The state was not the lowest-cost market in the region, but it occupied a favorable middle ground. It was less expensive than Minnesota while remaining competitive with its Plains neighbors.
That position has become less distinct since the onset of the pandemic. Prices increased, borrowing rose, and the burden placed on homebuyers grew. The central question is whether South Dakota still maintains the relative housing affordability advantage it enjoyed before 2020. The data show a clear answer: South Dakota remains more affordable than Minnesota and broadly competitive with Nebraska and North Dakota. At the same time, housing costs and borrowing burdens are materially higher than they were before the pandemic. The advantage remains, but it has narrowed substantially, as South Dakota has shifted toward a higher-cost position within the region. This matters because it changes who can realistically enter the housing market, particularly for first-time buyers and moderate-income households who historically benefited from the state’s relative affordability.
Rising Prices and a Changing Order
The most visible change in the housing market is the rise in home prices. Across all five states, typical listing prices climbed sharply between 2020 and 2022. South Dakota followed this pattern. Real median prices increased from about $296,000 in 2018 to about $390,000 in 2024, a gain of roughly 30 percent, in 2025 dollars.
Viewed over the same 2018 to 2024 window, the regional comparison shows relative positions across states. Nebraska rose from about $299,000 to roughly $360,000 in 2024, after peaking near $378,000 in 2023. Iowa increased from about $256,000 to about $302,000 in 2024, below its 2023 peak of about $321,000. Minnesota moved from about $362,000 to roughly $405,000 in 2024, after peaking near $416,000. North Dakota rose from about $301,000 to about $369,000 in 2024.
Two points follow. First, South Dakota recorded one of the larger sustained increases in the region relative to Nebraska, Iowa, and North Dakota. Second, the ordering across states changed. South Dakota moved from the middle of the regional price distribution to near the top, overtaking both Nebraska and North Dakota over this period. Furthermore, the gap with Minnesota narrowed, while the distance from Iowa widened.
More recent movement sharpens that picture. From their 2023 peaks to 2025, Nebraska, Iowa, and Minnesota posted larger percentage declines than South Dakota and North Dakota. Nebraska fell from about $378,000 to $346,000 (-8.6%), Minnesota from about $416,000 to $388,000 (-6.7%), and Iowa from about $321,000 to $283,000 (-11.8%). In contrast, North Dakota moved from about $351,000 in 2023 to $364,000 (+3.7%) in 2025 after peaking in 2024, while South Dakota moved from about $388,000 to about $379,000 (-2.3%). The cooling phase has been just as uneven as the ramp-up in prices.
Average listing prices reinforce this pattern. In South Dakota, average prices rose faster than median prices, indicating that higher-priced homes became more prominent in the market and that fewer lower-priced homes were available. The market shifted upward not only in level, but also in composition of housing available.
Prices have stabilized since their dramatic growth from the pandemic era, but stabilization is not a return to earlier conditions. Typical housing prices in South Dakota remain well above pre-pandemic levels, as they do across the region. The market has cooled from its peak, but the level shift persists. Housing in South Dakota remains significantly more expensive than it was just a few years ago.
Borrowing and Financial Strain on Homebuyers
Price growth tells only part of the story. The more important question for many households is how much debt they must take on to buy a home. One way to evaluate this is to compare the size of a mortgage, rather than the full home price, to a borrower’s income. Higher values indicate that a household is taking on more debt relative to what it earns, reflecting greater financial strain. Lower values indicate a more manageable borrowing position.
Before the pandemic, this measure was relatively stable across the region. In 2018, South Dakota borrowers typically took on loans equal to 2.46 times borrower income. Nebraska stood at about 2.20. Iowa was lower, at about 1.93. North Dakota was slightly higher at 2.50, while Minnesota reached about 2.59. Then conditions changed quickly.
By 2021, the typical borrower in South Dakota was taking on a mortgage close to 2.96 times income. Nebraska rose from 2.20 to 2.59 over the same period. North Dakota climbed from 2.50 to 2.78, while Minnesota peaked at about 3.15, the highest of comparison states. Even Iowa rose from 1.93 to 2.32. This was not a marginal shift. Buyers stretched significantly to remain in the market. In 2018, South Dakota’s borrowing burden was about 2.46 times income, above Nebraska and just below North Dakota. By 2021, it had risen to about 2.96, moving well above North Dakota and approaching Minnesota.
Since 2021, this measure has eased, but the relative ordering has changed in a significant way. In South Dakota, it fell from 2.96 to 2.70 by 2024. Minnesota declined from 3.15 to 2.70, leaving the two states at nearly identical loan-to-income ratios in the most recent year available. Nebraska fell back to 2.35, North Dakota to 2.60, and Iowa to 2.10. By 2024, South Dakota’s borrowing burden stood well above Iowa, Nebraska, and North Dakota, and effectively matched Minnesota.
At first glance, the decline in these ratios suggests we are heading in the right direction, but it does not reflect an improvement in underlying affordability.
Why Borrowing Has Declined in Most States
The recent decline in borrowing burdens is not primarily the result of falling home prices. It reflects changes in financing conditions, particularly higher mortgage rates. When rates were low in 2020 and 2021, buyers could support larger loans with a given income because monthly payments were relatively manageable. As rates rose, the cost of borrowing increased. The same household income could support a smaller mortgage. In that scenario, loan sizes typically decline even if house prices remain elevated.
A simple example illustrates the mechanism. A household earning $80,000 might have been able to support a $240,000 mortgage when rates were low. As rates increased, that same household might only qualify for a $210,000 mortgage. The ratio of loan size to income (LTI) falls, but the household is more constrained. This is the typical adjustment mechanism, and it appears in most states in the data. After rising sharply during the pandemic, loan sizes in Nebraska, Iowa, and Minnesota have declined. South Dakota is the exception. Despite higher rates, loan amounts have continued to increase, reflecting a market where prices have remained elevated enough to sustain larger loans. In this way, a lower loan-to-income ratio can reflect tighter constraints rather than improved affordability.
Empirically, the contrast is clear. In Nebraska, inflation-adjusted loan sizes increased to about $248,000 and declined to about $241,000 in 2024. Minnesota followed a similar path, rising to roughly $315,000 and then falling to about $282,000 in 2024. Iowa increased to about $196,000 and declined to roughly $190,000 in 2024, while North Dakota peaked near $267,000 and eased to about $262,000 in 2024. South Dakota diverges from this pattern. Median loan amounts increased from about $224,000 in 2018 to about $267,000 in 2021 and continued to rise to $272,000 in 2024.
Over the same period, income growth has been more modest. In South Dakota, median loan amounts increased by 21 percent between 2018 and 2024, while median homebuyer income rose by about 10 percent. Loan growth was roughly twice as large as income growth, helping explain why borrowing pressures increased during the pandemic and remain elevated today.
Higher rates may have pushed some lower-income borrowers out of the market, but that explanation is incomplete. Similar selection effects would be expected across all comparison states, yet loan sizes declined elsewhere while continuing to rise in South Dakota. This suggests that South Dakota’s pattern reflects more than a shift in who remains in the market. Home prices have stayed high enough to support larger loans, while income growth has not kept pace. As a result, the apparent improvement in borrowing ratios reflects tighter borrowing constraints rather than a true improvement in affordability.
Are People Buying Larger Homes Than Before the Pandemic?
If homes had become substantially larger or “better” during this period, some increase in prices and borrowing would be easier to justify. The data do not support that explanation.
Median square footage has remained fairly stable across the region. In South Dakota, the typical home on the market today is not dramatically larger than it was before the pandemic. Nebraska and Iowa show similar stability. North Dakota moves somewhat from year to year, but no clear upward trend emerges. Minnesota also shows variation without a sustained increase. In other words, there is little evidence that the average home being purchased today provides materially more space than it did in 2018.
The median number of rooms shows even less movement. Across all five states, the typical number of rooms changes little over time. This reinforces the same point from a different angle. Buyers are not moving into substantially larger or more complex homes. Using both of these measures, the conclusion is straightforward. Buyers are paying more, but they are not receiving more. Housing has become less affordable since the start of the pandemic.
Limited Supply Response
A common explanation for rising prices is that supply failed to keep up with demand. Building permit data for new residential construction provides one way to assess this hypothesis empirically. In raw terms, Minnesota issues far more permits than the comparison states. That is not surprising given its much larger population. Once permits are adjusted for population, however, the comparison changes dramatically.
South Dakota stands out on a per capita basis. Because this measure is adjusted for population, it accounts for differences in growth across states and still shows that South Dakota built more relative to its size. During the pandemic, permits per 1,000 residents rose sharply and reached levels above its Midwest neighbors. Activity has since eased, but it remains elevated relative to its peers. In 2024, South Dakota issued about 6.49 permits per 1,000 residents, compared to 5.22 in Nebraska, 3.88 in Iowa, 3.61 in Minnesota, and 2.92 in North Dakota. Even after the post‑pandemic pullback, South Dakota continues to lead the region in per capita building. Minnesota still built at a substantial pace in total terms, but its apparent dominance shrinks once population is taken into account. The pattern is consistent throughout the period. States expanded building activity during the pandemic, but not to the same extent as South Dakota. Even after easing, South Dakota remains above its peers.
Even so, this increase in supply was not enough to offset increases in demand, illustrating just how strong demand pressures have been in the state. Prices rose rapidly between 2020 and 2022 despite higher levels of construction. South Dakota built more than its peers on a per capita basis, yet affordability still declined. Part of this reflects the timing of supply. Building permits are a forward-looking indicator, capturing authorized construction rather than completed homes. Even when construction activity increases, it takes time for those units to enter the market. That lag helps explain why prices can continue rising even as the supply response begins. Supply responded, but not quickly enough or at a large enough scale to offset our current surge in housing prices.
A Market That Has Shifted
These patterns point to a South Dakota housing market that has shifted in level and in relative position within the region. Prior to the pandemic, South Dakota occupied the middle ground. It was clearly less expensive than Minnesota and broadly comparable to Nebraska and North Dakota. In terms of home prices, Nebraska and North Dakota were often at or above South Dakota’s levels, while borrowing burdens in South Dakota were generally higher than in Nebraska and closer to those in North Dakota.
Since 2020, that relationship has changed. Housing prices in South Dakota rose faster than in several neighboring states, and borrowing burdens increased accordingly. By 2024, South Dakota had moved ahead of both Nebraska and North Dakota on key measures. Median prices placed South Dakota second in the region behind Minnesota, and the typical loan-to-income ratio in South Dakota now matches Minnesota and stands above Nebraska and North Dakota. In other words, South Dakota did not simply become more expensive, but also moved up relative to its neighbors.
The same pattern appears across supporting indicators. Loan sizes increased sharply during the pandemic and have declined in most states since their peaks. In South Dakota, they have continued to rise through 2024. While supply also expanded across the region, South Dakota built at a higher per capita rate than its neighbors and still saw affordability deteriorate. Recent data show some softening, but the adjustment has been uneven. Nebraska, Iowa, and Minnesota have seen larger pullbacks in both prices and loan sizes. North Dakota shows a more modest adjustment. South Dakota has experienced the least post-peak adjustment. Prices remain elevated, loan sizes are at their highest levels in available data, and borrowing constraints have tightened without a corresponding decline in costs.
The pre-pandemic advantage that South Dakota held relative to Nebraska and North Dakota has narrowed or, in some cases, reversed. South Dakota still compares favorably to Minnesota in level terms, but its position within the region has shifted. The state now looks much closer to higher-cost peers than to its traditional peers on several key measures of housing affordability. Buyers are paying more without receiving larger homes, and increased construction has not been sufficient to offset demand pressures. South Dakota remains relatively affordable in absolute terms, but it no longer occupies the same position in the regional housing market. If population growth continues and supply does not accelerate further, the pressures observed over the past several years are likely to persist.
