The path to homeownership in the Indianapolis metro area has been filled with many roadblocks in recent years. For many, the dream remains out of reach. To understand the complexities of housing affordability in the region, it’s crucial to look at key indicators like the Indianapolis Homebuyer Misery Index. Developed by the Common Sense Institute (CSI)—a non-partisan research organization dedicated to examining the fiscal impacts of policies, initiatives, and proposed laws— this index provides valuable insights into the challenges faced by residents and potential homebuyers.

In Layman’s Terms

In general, a “misery index” is an economic indicator that tries to measure how “miserable” people might feel because of economic factors. It’s usually a combination of things that make people feel worse off financially. In this case, however, The Indianapolis Homebuyer Misery Index focuses specifically on how “miserable” it is to try to buy a home in the Indianapolis area. It does this by combining two key things that make buying a home more difficult or “miserable”:

  • Housing Prices: When home prices go up, it’s harder for people to afford them.
  • Mortgage Interest Rates: When interest rates go up, it costs more to borrow money to buy a house (your monthly payments are higher).

Why Consider the Indianapolis Homebuyer Misery Index?

The Indianapolis Metro Area Homebuyer Misery Index, as developed by the Common Sense Institute, captures the impact of household income, housing prices, and mortgage rates on the affordability of new homes. The index is based on 30-year mortgage rates and Zillow home prices. By tracking and combining these two pieces of data, the index can provide a clear picture of how affordability is trending in the region.

That also means that local officials and other key players are provided a clear picture in times when all signs are pointing to a rising misery index: when it is becoming more miserable to buy a home in the area.

Housing Prices: Affordability Decline

The Indianapolis Homebuyer Misery Index indicates that affordability continued to decrease in 2023 and 2024. “The Indianapolis Homebuyer Misery Index indicates that affordability continued to decrease in 2023 and 2024. In the Indianapolis metro area, affordability decreased by 4% in 2023 and 0.8% in 2024.  This is due to a combination of increased home prices, 202% in 2023 and 2.3% in 2024, and continued high mortgage rates.”

Impact of Home Prices

Home prices in the Indianapolis metro area have been on the rise, further straining affordability. In fact, Zillow predicts that this trend is here to stay, at least through 2025. “Zillow predicts that home prices in Central Indiana will rise faster in 2025 than they did last year, making Indianapolis the only Top 5 metro where a steeper price increase is expected. Prices will rise 3.4% in 2025, Zillow predicts, up from 2.8% in 2024,” reports IndyStar.

Influence of Mortgage Rates

Continued high mortgage rates also contribute significantly to the decline in affordability. There could be good news on the horizon in this regard.  The National Association of Homebuilders suggests, “According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.” To give a better understanding of the impact of interest rates, Common Sense Institute says, “To measure the impact on the average homeowner in the Indianapolis metro area, Common Sense Institute calculated the number of hours that one would have to work while earning the average hourly wage in December from 2013 to August 2024 to cover the monthly mortgage payments. Since December 2020 months, driven primarily by the increase in mortgage rates, an additional 229 hours of work per month has become necessary to cover the mortgage on a newly purchased average-price home.”

What This Means for Indianapolis Homebuyers and Potential Buyers

The Indianapolis Homebuyer Misery Index and the data from the Common Sense Institute paint a clear picture: affordability is a major concern in the Indianapolis metro area. By understanding these trends, residents and potential buyers can make informed decisions about their housing needs and financial planning, while policymakers and other officials take action to address the concerns.