States With the Healthiest Housing Markets

No doubt, some housing markets were hit harder than others during the recession. As a result, the markets less banged up are poised to be the first to bounce back when the housing recovery takes off.

“You have some markets where so many things have gone wrong; it’s very difficult for those markets to make a recovery,” said Cameron Findlay, the chief economist at LendingTree. “Then, there are other markets, where only a couple things have gone wrong. For those markets, there’s still hope of a recovery.”

LendingTree crunched the numbers for all 50 states and the District of Columbia to find the healthiest and least healthy housing markets, based on five key criteria: debt-to-income ratio, unemployment, home ownership, negative equity and the average loan-to-value ratio.

It’s worth noting that all of the top 10 have home prices that are below the national average of $298,000, most of them well below that mark.

Geographically speaking, more than half of the top 10 states came from the central time zone, while two came from New England and there were one each from the Mountain and Pacific Time Zones. Still, the top 10 only make up a small part of the overall U.S. market – 8.15% to be exact. By comparison, the bottom 10 make up nearly 36%. California, alone, accounts for nearly 23%.

Here are the top 5 states with the healthiest housing markets:

Iowa | Photo: Thinkstock | Comstock Images | Getty Images

5. Iowa
Debt as percent of income: 13%
Unemployment rate: 6.1%
Home ownership: 71.1%
Negative equity: 42.9%
Average home price:$152,000
Loan as percent of home value: 66.7%
Percent of U.S. Market:0.42%

Iowa has some of the lowest real estate prices in the top 10. But it has one of the highest rates of negative equity in the top 10, which is probably what kept them from ranking higher on the list, Findlay said. Other than that, it has the best debt as a percent of income on the list at 13% and it has a low unemployment rate. “They just missed out on taking the gold!” Findlay quipped.

Maine | Photo: David McLain | Getty Images

4. Maine
Debt as percent of income: 17%
Unemployment rate: 7.5%
Home ownership: 73.8%
Negative equity: 30.1%
Average home price:$210,000
Loan as percent of home value: 58.6%
Percent of U.S. Market:0.11%

Debt as a percent of income is pretty low in Maine, and the loan as a percent of home value is the lowest in the top 10. They have the second-highest home ownership rate in the top 10. The average home price is $210,000, compared to the national average of $298,000.

New Hampshire | Photo: Denis Tangney Jr | Getty Images

3. New Hampshire
Debt as percent of income: 18%
Unemployment rate: 5.4%
Home ownership: 74.9%
Negative equity: 25.2%
Average home price:$243,000
Loan as percent of home value: 69.8%
Percent of U.S. Market:0.42%

New Hampshire has a very low unemployment rate at 5.4%, compared to the national rate of 8.8%, which helped the state keep its debt as a percent of income to just 18%. There’s a high percentage of home ownership here and the average home price is below the national average of $298,000.

Minnesota | Photo: Anne Rippy | Photographer's Choice | Getty Images

2. Minnesota
Debt as percent of income: 17%
Unemployment rate: 6.7%
Home ownership: 72.6%
Negative equity: 22.2%
Average home price:$224,000
Loan as percent of home value: 65.6%
Percent of U.S. Market:1.01%

The low rate of unemployment is what really stands out with Minnesota, Findlay said, at 6.7% compared to the U.S. rate of 8.8%. Negative equity was among the best at just 22.2% and debt as a percent of income is just 17%.

North Dakota Photo: Richard Cummins | Robert Harding World Imagery | Getty Images

1. North Dakota
Debt as percent of income: 14%
Unemployment rate: 3.7%
Home ownership: 67.1%
Negative equity: 37.7%
Average home price:$173,000
Loan as percent of home value: 60.1%
Percent of U.S. Market:0.07%

And the healthiest real-estate market in the U.S. is … North Dakota! “There’s a very low cost of ownership there and a very low unemployment rate, which is a huge factor for them,” Findlay said. They have a low cost of living, the unemployment rate is less than half the national average at just 3.7% and debt to income is the one of the best on the list at just 14%. Real estate prices are pretty inexpensive here, with the average home price at $173,000, compared to the national average of $298,000.