How are Indiana buyers faring in their search for their home?  

It’s not necessarily a case of “good news and bad news.” Not really. Instead, there are signals that the market may be experiencing a significant shift – and others that indicate buyers are not seeing much more favorable conditions when it comes to making their dream of ownership a reality. How is the current housing market impacting buyers at different stages? And is there, in fact, good news on the horizon?  

The State of the Indiana Housing Market 

As you’ve no doubt recognized (or experienced), the housing market is warm to hot in Indiana. Redfin gives the Indy metro region a score of 78, which is considered “very competitive.” Many of the homes for sale pull in multiple offers – and many of those waive contingencies (i.e. they commit regardless of a home’s condition, forgoing conditions like inspections).  

Average homes go pending in about 10 days, and “hot homes” (those that can expect a lot of competition given factors such as location, size, amenities, etc.), typically go pending in four days at 2% above listing. According to recent figures, the number of homes sold in the Indy metro area decreased by 21.4% while the median price increased by 6.5%.  

But… What Is Really Happening? 

If you sensed a “but” coming, you are correct. And it’s a fairly significant “but.” Mortgage rates have more than doubled. They’re hovering around 8%, up from just over 3% three years ago. To fully understand how much of a difference this makes is, go ahead and use a mortgage calculator. We did.  

If you took out a 30-year mortgage at 3% on $350,000 a few years ago, your mortgage payment would be about $1,500 per month. You’d also end up paying just over $181,000 in interest over the life of your loan. Jack that up to 8%, and your monthly payment sits at about $3,000. You’ll also pay well over $350,000 in interest over the course of your mortgage. 

To further underscore how much of a difference this makes: In 2023, for every $1000 – just $1000 – increase in the median home price, 3,024 people/households are priced out of the market. Even if home prices decrease, increases in interest rates mean homeownership is unaffordable to many, if not most, Hoosiers. 

Yes, wages have increased in recent years… But they have not kept pace with increases in food, health care, education, transportation, and housing prices. This means that, for millions of Hoosiers, the cost of homeownership is out of reach. 

How Is the Market Impacting First-Time Buyers? 

According to the National Association of Realtors, the share of first-time homebuyers dropped to an all-time low of 26%. Further, these buyers were the oldest they’d ever been because more of us have to postpone (or even forgo) milestones like purchasing a home. 

Jessica Lautz, NAR vice president of demographics and behavioral insights, says, “For first-time homebuyers, the lack of affordability is playing a key role in holding them back from homeownership. They don’t have the equity that repeat buyers have for a down payment or to buy in cash. They have to save while paying more for rent, as well as student debt, child care, and other expenses, and this year we are facing increasing home prices while mortgage rates are also climbing.” 

What About Repeat Buyers? 

As Lautz points out, repeat buyers do have the advantage of more equity, cash access, and (often) not having to pay rent while trying to save for a down payment. But here too we see some fissures in the market. The average age of repeat buyers also increased to nearly 60, another all-time high. 

It is also worth noting that you can’t buy as much house, so to speak, as you could just a few years ago. Indiana Builders Association CEO Rick Wajda points out that the median home price in the Hoosier state is about $400,000. A household would have to earn at least $120,000 to afford this, which prices over two million households out. He adds, “Mortgage rates currently are pushing eight percent – if you go back two, two-and-a-half years ago, they were under three percent. It’s taking Hoosiers a lot more money to qualify for a home whether it’s new or on the existing market.” 

Mark Fisher of the Indiana Association of Realtors says, “Housing policy has not kept up with the growth and demand in the market. The supply isn’t keeping up, and financing challenges with interest rates increasing continue to provide affordability challenges.” This goes for both first-timers and seasoned buyers. For every one housing unit built in the past 13 years, the state has added two jobs. The math does not work out. 

What’s Next? 

Desperate times call for… creative measures. One such initiative will roll out in 2024, thanks to legislation enacted by the Indiana General Assembly this year. Counties and municipalities in Indiana will be able to apply for loans that help with projects such as roads, water lines, and other residential infrastructure projects. Wajda says, “If we have that infrastructure in place, we can help try to drive down the cost.”  

The loans are possible under HEA 1005, which stipulates that at least 70% of the funding available go towards eligible projects for housing infrastructure in communities with fewer than 50,000 people. Mark Fisher explains, “We’re looking at how to empower and enable smaller communities to think about housing as a talent attraction/retention tool to really develop a housing strategy that meets their economic development strategy.” 

This is a step in the right direction. Ready to take another with us? Visit Build Indiana Roots to learn more.