Sioux Falls, South Dakota Real Estate Market 2026: Score 42, 2% Unemployment, Inventory Problem

Sioux Falls, South Dakota scores 42 out of 100 on the PropertyIQ index as of February 2026.

That score requires context, because Sioux Falls looks exceptional on every economic metric that normally produces a high PropertyIQ score. The unemployment rate is 2.0% as of November 2025. The metro has grown faster than nearly any other Plains city over the past decade. There is no state income tax. And home values have appreciated 47% over the past five years.

The score of 42 comes from a specific market-level condition that the economic data obscures: demand has collapsed relative to the amount of supply currently available.

PropertyIQ scores Sioux Falls a 42 out of 100 as of February 28, 2026. Scores are updated monthly using Zillow, Census, and Realtor.com data.

The Supply-Demand Disconnect in Sioux Falls

The supply score for Sioux Falls is 75.3 out of 100 as of February 2026. There is plenty of inventory. The demand score is 15.4 out of 100.

That 15.4 demand score is the number driving the 42. A market can have strong economic fundamentals and still score low on PropertyIQ when buyer demand in the near term is not matching the pace of available supply. This is exactly what Sioux Falls is showing.

Total for-sale inventory is 1,119 homes as of February 1, 2026, up 19.24% year over year. New listings are down 4.35% year over year, which means fewer new homes are entering the market. But the overall inventory count is still rising because existing homes are sitting on the market longer before going under contract.

Days on market is 52 as of February 2026. That is moderate for a small metro in February, but not a sign of a tight market. Homes spending seven to eight weeks on market in a city of 293,000 people suggests the market is buyer-friendly, not seller-driven.

The pending ratio is 0.45 as of February 2026. For every 100 homes listed, 45 are under contract. A ratio below 0.5 indicates that less than half of available inventory has found a buyer, which in a market with rising total supply creates the conditions for further demand score weakness if the trend continues.

The Sioux Falls South Dakota Housing Market: What the Score Is Not Saying

A score of 42 does not mean Sioux Falls is in economic distress. The economic data is clear:

Unemployment is 2.0%. The metro has consistently operated near full employment, driven by a diversified base including Sanford Health (the largest employer), banking and financial services concentrated due to the state's favorable lending laws, and a growing logistics and distribution sector.

Home values have appreciated 46.96% over the past five years as of February 2026. That is a meaningful long-term return for anyone who owned property here through the pandemic-era price surge.

The Zillow one-year appreciation forecast is 2.7% as of December 2025. The algorithmic model expects continued modest price appreciation over the next 12 months, which means the score drop has not triggered a forecast of price declines.

The income to buy at the median listing price of $367,250 is $97,614 per year. The metro median household income is $81,418 as of 2023 Census data. There is a gap of $16,196 between what the median household earns and what is required to buy the median home. That affordability gap is the structural explanation for the low demand score: prices have risen faster than the income base that needs to qualify for mortgages.

Sioux Falls Real Estate: The Overvaluation Signal

The calculated overvaluation reading for Sioux Falls is 15.5% as of February 2026. The calculated affordable home price for the metro is $306,318 based on local incomes and cost-of-living benchmarks. The current Zillow home value is $331,255, which is $24,937 above the affordable benchmark.

That 15.5% overvaluation is the mathematical connection between 2% unemployment, strong economic growth, and a demand score of 15. When prices rise faster than incomes, the buyer pool that can qualify for median-priced mortgages shrinks. Fewer qualified buyers creates the low demand score. The low demand score drives the 42 PropertyIQ reading.

This pattern is visible in other markets across the dataset. Nashville, Tennessee scores 26, a more extreme version of the same dynamic: strong economic credentials undermined by a price surge that outpaced incomes. Dallas, Texas scores 31, also affected by post-pandemic pricing that reduced affordability without a commensurate income increase.

Sioux Falls at 42 sits in the same category, though at a less severe degree than Nashville or Dallas.

Sioux Falls Housing Market: Rent and Cash Flow Picture

The Zillow rent index for Sioux Falls is $1,274 per month as of December 2025. At a Zillow home value of $331,255, the gross rent multiplier is approximately 21.7.

A GRM above 20 indicates a market where cash flow from a financed property purchase will be structurally difficult without a significant down payment. Sioux Falls is a market where equity play and long-term appreciation have historically been the thesis for investors, not immediate cash flow.

The income-to-rent figure shows that a household earning approximately $50,953 per year can afford market rent without exceeding a 30% cost burden. Since the metro median income is $81,418, the rental market here is accessible to most of the workforce, but that accessibility has not translated into price discovery discipline on the ownership side.

Price cuts affect 6.82% of active listings as of February 2026. That is a relatively low price cut rate for a market with a demand score of 15, which may indicate that sellers have not yet fully adjusted their pricing expectations to match current buyer capacity. When seller pricing expectations lag behind buyer purchasing power, inventory accumulates. This is the Sioux Falls situation as of February 2026.

The Population and Growth Story

Sioux Falls has a population of 293,107 in the metro as of 2023 Census data. The broader MSA (Sioux Falls, SD-MN) covers 304,555 residents. The city has been one of the fastest-growing municipalities in the upper Midwest by percentage rate, drawing population from rural South Dakota, Minnesota, and Iowa due to the lack of state income tax and a robust healthcare and financial services employment base.

The homeownership rate is 66.63%, close to the national average. Median age is 36.1 years, reflecting a relatively young population consistent with the migration patterns of working-age adults relocating for employment. Younger median-age markets have historically supported more durable household formation, which underpins long-term demand.

The unemployment rate of 2.0% is one of the lowest in the PropertyIQ dataset. For context, markets in Ohio and Michigan that score in the 80s and 90s often carry unemployment rates in the 3-5% range. The Sioux Falls economic engine is genuinely strong. The score of 42 is not an economic story. It is a price-relative-to-income story.

What the Sioux Falls Score Means Going Forward

A score of 42 from a 2% unemployment base is unusual. It signals that the market needs either a period of income growth to catch up to prices, or a price correction to close the affordability gap, before the demand score returns to levels that produce a high PropertyIQ rating.

The 2.7% Zillow appreciation forecast for the next 12 months suggests prices will hold or grow modestly rather than decline. If that forecast is accurate, the path back to a higher score runs through income growth, not price reduction. The South Dakota economy does produce above-average wage growth in its core sectors, particularly healthcare and financial services, so the income gap may close over a two to three-year horizon without requiring a price correction.

For buyers evaluating the Sioux Falls market, the 42 score is a yellow flag on current conditions, not a verdict on the market's long-term trajectory. A market with 2% unemployment and 47% five-year appreciation does not produce a bad score because of economic dysfunction. It produces a moderate-to-low score because current price levels are running ahead of near-term buyer capacity.

PropertyIQ score as of February 28, 2026. Listing and inventory data as of February 1, 2026. Zillow home value data as of January 31, 2026. Forecast data as of December 2025. Census data as of 2023. Economic data as of November 2025. All data for informational purposes only.