FREE DOWNLOAD: 10 Costly Mistakes Foreigners Make Buying U.S. Real Estate

US Housing Market 2025: Why US Housebuilders are Still Confident in This One Region

For international investors keenly observing the U.S. real estate landscape, recent headlines might suggest a cooling market, with widespread concerns about rising mortgage rates and affordability challenges. While national builder confidence has seen a dip, a closer look reveals a crucial regional nuance: the Midwest is emerging as a beacon of resilience, offering compelling and stable investment opportunities.

This in-depth guide will dissect the current U.S. housing market in 2025, moving beyond national averages to highlight the unique strengths of the Midwest. We’ll demonstrate why this region, characterized by increasing builder confidence, superior housing affordability, and robust job markets, represents a strategic pivot for global property investors seeking consistent cash flow and sustainable growth.

The National Housing Market in 2025: A Tale of Two Realities

The U.S. housing market in 2025 presents a complex picture. Following a period of rapid appreciation, elevated mortgage rates, and persistent affordability challenges have led to a more cautious environment. Many prospective buyers are sitting on the sidelines, creating a standoff with sellers.

National Builder Confidence: A Dip in Sentiment

Recent data from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reflects this nationwide apprehension. The HMI, which gauges builder perceptions of current single-family home sales and sales expectations, saw a general decline in early 2025. For instance, the HMI dropped to 32 in June 2025, down two points from May, marking one of its lowest readings since 2012. Builders are increasingly resorting to price cuts and incentives to attract hesitant buyers

NAHB Chief Economist Robert Dietz noted, “Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets.” This sentiment underscores a national market grappling with affordability and demand-side challenges.

The Nuance: Beyond the National Average

However, national averages can mask significant regional disparities. While the broader sentiment among builders has softened, certain regions are demonstrating remarkable resilience and even growth. This variance is precisely where astute international investors can uncover stable, high-potential opportunities.

The Midwest Resurgence: A Beacon of Builder Confidence

Despite the national trend, the Midwest region is showcasing a distinct positive trajectory in builder sentiment, underscoring its unique stability and appeal.

Builder Optimism on the Rise in the Midwest

Contrary to the national decline, the Midwest region’s three-month moving average for HMI scores actually moved one point higher to 41 in June 2025, demonstrating an increased level of builder confidence. This contrasts sharply with declines seen in the Northeast, South, and West.

This uptick in builder confidence in the Midwest is a strong indicator of:

• Sustainable Local Demand: Builders are seeing consistent buyer interest, suggesting a more balanced market less susceptible to the volatility of higher-cost regions.
• Favorable Development Conditions: Local market conditions, potentially including more accessible land and less stringent regulations compared to coastal areas, may be supporting new construction.
• Belief in Future Stability: The increased confidence reflects builders’ positive outlook on the region’s continued growth, affordability, and overall economic health.

Why the Midwest is a Resilient Market for International Investors

The Midwest’s rising builder confidence is not an isolated metric; it’s a reflection of deeper, fundamental strengths that make it an increasingly attractive region for international real estate investors.

Unmatched Housing Affordability

One of the most compelling advantages of the Midwest is its superior housing affordability. This is a critical metric for long-term real estate investment, ensuring a larger pool of potential renters and buyers.

• According to the National Association of Realtors (NAR)’s February 2025 Housing Affordability Index, the Midwest was the most affordable region in the U.S., with an index value of 134.2. This means the typical family in the Midwest earns significantly more than the income needed to afford a median-priced home.
• Furthermore, the Midwest boasted the lowest mortgage payment as a percentage of income at just 18.6%, compared to 35.1% in the West (Source: NAR.Realtor, May 1, 2025).
• This affordability translates directly to lower entry costs for international investors, allowing for higher cash-on-cash returns and potentially enabling the acquisition of multiple properties for portfolio diversification.

Stable Job Markets and Economic Diversification

The Midwest’s economic landscape is characterized by diversification and stability, providing a robust foundation for its housing market. While historically known for manufacturing, many Midwest cities have successfully diversified into high-growth sectors.

• Cities like Cleveland, Columbus (OH), Des Moines (IA), Milwaukee (WI), Indianapolis (IN), and Kansas City (MO) boast strong job growth in healthcare, education, technology, logistics, and finance (Source: Minut.com, “The 15 best long-term U.S. rental markets in 2025” and Extra Space Storage, “15 Best U.S. Cities to Find a Job in 2025”).
• This diversified job market ensures a consistent influx of residents seeking employment, which directly translates to stable rental demand and a broad tenant base.

Consistent Cash Flow and Sustainable Growth

The combination of high housing affordability and stable job markets in the Midwest creates an ideal environment for consistent cash flow and sustainable property appreciation.

• High Rental Yields: Many Midwest cities offer significantly higher rental yields compared to more expensive coastal markets. For example, cities like Detroit (22%), Cleveland (16.6%), Toledo (12.2%), and Peoria (12.2%) show exceptionally strong gross rental yields (Source: Rentometer, “The Best and Worst Cities for SFR Investors by Rental Yield”).
• Sustainable Appreciation: While dramatic price spikes might be less common than in speculative markets, the Midwest offers steady, sustainable appreciation driven by fundamental demand and economic stability, providing a reliable path to long-term wealth building for international investors.

Related: The Best U.S. Real Estate Markets For Foreign Investors

Case Study: Cleveland, Ohio – A Midwest Investment Powerhouse

Cleveland, Ohio, stands out as a prime example that encapsulates the resilient and profitable investment characteristics of the Midwest.

• Leading Home Price Growth from an Affordable Base: As of early 2025, Cleveland recorded a staggering 10.3% year-over-year increase in home prices, outpacing many major U.S. metropolitan areas. Crucially, this growth originates from one of the most accessible median home prices in the country (often under $200,000), allowing international investors to enter the market without prohibitive upfront capital.
• Robust Economic Anchors: Cleveland’s economy is strongly anchored by world-renowned institutions like the Cleveland Clinic and Case Western Reserve University, along with a thriving manufacturing sector and emerging tech industries. This provides a stable and growing employment base.
• Strong Rental Market: The city’s affordability and job growth drive a robust rental market with high occupancy rates and attractive rental yields (e.g., 10.1% gross rental yield for Cuyahoga County/Cleveland, Source: RiskWire, May 2, 2025). This ensures consistent cash flow for investors.
• Landlord-Friendly Environment: Cleveland is also generally considered landlord-friendly, offering a more predictable regulatory environment compared to some other U.S. regions.

Cleveland illustrates how focusing on fundamental economic health and affordability, rather than speculative booms, yields stable and highly rewarding investment opportunities for international investors in the U.S. housing market.

Download Report: Download the Comprehensive Cleveland Real Estate Market Investor Report

Key Metrics for the International Investor: Beyond the Headlines

For international investors, effective market identification goes beyond national news cycles. Your strategy should be rooted in a data-driven approach that prioritizes long-term stability and cash flow potential.

Prioritizing Affordability and Job Markets

As demonstrated by the Midwest’s performance, housing affordability (the ratio of home prices to local incomes) and the strength and diversification of the local job market are paramount. These two metrics are highly correlated with sustained rental demand, tenant quality, and organic property value growth.

Other Crucial Metrics to Evaluate:

• Population Growth & Demographics: Look for areas with positive net migration, especially of working-age populations and families.
• Rental Demand & Vacancy Rates: High demand and low vacancy rates indicate a healthy rental market and consistent income.
• Rent-to-Price Ratios: A high rent-to-price ratio often indicates better cash flow potential.
• Landlord-Friendliness: Research local and state regulations to ensure a favorable environment for property owners.
• Infrastructure Investment: Ongoing public and private investment in infrastructure (transport, amenities) signals future growth.

Navigating Your Investment: Practical Steps for International Investors

Once you’ve identified promising Midwest markets, practical steps are essential to execute your investment strategy effectively.

Specialized Financing Options

• Foreign National Mortgages: Designed for non-residents, these loans are available from various lenders, often requiring larger down payments but without a U.S. credit history.
• DSCR Loans: Ideal for international investors focused on rental income, these loans qualify based on the property’s cash flow rather than your personal income, simplifying the process.

Related: The Best U.S. Mortgage Loans For Non-Resident Foreigners

Assembling Your Local Expert Team

Even with remote management tools, a trusted team on the ground is invaluable:

• U.S. Real Estate Agent: Find an agent specializing in investment properties and working with international buyers in your target Midwest market.
• U.S. Property Management Company: Essential for handling day-to-day operations, tenant relations, and maintenance, ensuring consistent cash flow.
• U.S. Tax Advisor (experienced with foreign investors): Critical for navigating U.S. federal and state tax obligations, including rental income, capital gains, and FIRPTA. They can also advise on the UK-US Double Taxation Treaty benefits.
• U.S. Real Estate Attorney: Necessary for legal due diligence, contract review, and ensuring a smooth closing process.

Related: How to Structure Your U.S. Property Investment For Tax Efficiency and Liability Protection

Conclusion: The Midwest – A Prudent Choice for Global Capital

While the national U.S. housing market may exhibit mixed signals, the increasing builder confidence in the Midwest, coupled with its unparalleled housing affordability and robust, diversified job markets, positions it as a highly resilient and attractive region for international investors in 2025.

By focusing on fundamental metrics and leveraging the distinct advantages offered by Midwest cities like Cleveland, global property investors can unlock stable investment opportunities, achieve consistent cash flow, and build long-term wealth in a market poised for sustainable growth.

 

Frequently Asked Questions (FAQs) for International Investors on the US Housing Market

Here are answers to common questions international investors have about the current U.S. housing market and its regional prospects.

Q: Is the U.S. housing market heading for a crash in 2025?

A: While some regions may experience price adjustments due to elevated mortgage rates and affordability challenges, a widespread national crash is not broadly anticipated by experts. Many forecasts suggest a moderation of price growth rather than a sharp decline.

Q: What does increased builder confidence in the Midwest mean for investors?

A: Increased builder confidence in the Midwest indicates strong local demand, stable market conditions, and a positive outlook for future growth in the region. This suggests a more resilient market compared to other areas where confidence is declining, offering stable investment opportunities.

Q: Why is housing affordability a key metric for international investors?

A: Housing affordability, defined by lower home prices relative to local incomes, ensures a larger pool of potential renters and buyers. This leads to lower entry costs for investors, higher potential cash-on-cash returns, and more sustainable rental demand.

Q: Which U.S. regions offer the best housing affordability for investors in 2025?

A: The Midwest is currently highlighted as the most affordable region in the U.S., offering lower median home prices and mortgage payments as a percentage of income compared to coastal or Sun Belt markets.

Q: How do stable job markets contribute to a good real estate investment?

A: Stable and diversified job markets ensure a consistent influx of residents seeking employment, which directly translates to consistent demand for housing (both rentals and purchases). This supports property values and provides a broad, reliable tenant base for investors.

Q: Why is Cleveland, Ohio, a good example of a resilient market for international investors?

A: Cleveland demonstrates exceptional affordability, a strong and diversified economic base (healthcare, education, manufacturing, tech), and has seen significant home price growth from a low base. It offers high rental yields and a generally landlord-friendly environment, aligning with key metrics for stable investment.

Q: Can international investors get a mortgage for properties in the U.S. Midwest?

A: Yes, international investors can utilize specialized “Foreign National Mortgages” or “DSCR loans.” These are designed for non-U.S. citizens, often requiring larger down payments but evaluating your financial standing based on your home country’s financial history or the property’s income potential.

Q: What are the main tax implications for international investors in the U.S. housing market?

A: International investors are subject to U.S. federal income tax on rental profits (Form 1040-NR), annual property taxes, and FIRPTA (15% withholding on gross sales price upon sale). The UK-US Double Taxation Treaty helps avoid double taxation. Estate tax is also a critical planning consideration.

Q: Is professional property management essential for remote international investors?

A: Yes, a professional local property management company is highly recommended. They handle tenant relations, maintenance, rent collection, and legal compliance, ensuring your investment is well-managed and cash flow is consistent without your constant physical presence.