The Unaffordable American Dream: Most Hoosiers Priced Out of the Housing Market

In 2021-2022, the housing market wasn’t just hot. It was scorching. Low inventory and strong demand created a perfect seller’s market, and prices ticked up to a national average of $412,505 for a new home and $374,900 for an existing home (up over $50,000 from 2020). What goes up must come down?  

Ian Shepherdson, chief economist and founder of Pantheon Macroeconomics, predicts that existing home sales will fall by 25% by the end of summer 2022, cooling the pace of sales from 6.02 million to 4.5 million. Sheperdson says, “The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices.” 

Good news for hopeful house hunters – unless they want to live in Indiana.  

The Indiana Housing Market 

Indy real estate professionals do not expect a drop in housing activity here at home. While sales decreased 2.4% nationwide in February, 2022, for example, they increased by 3% in Indiana. Century 21 Scheetz’s Amy Spillman says she has also seen a rise in rates. Currently, the average monthly mortgage payment has grown by more than $400. 

Spillman says, “We don’t think that home prices are coming down anytime soon. We think that will remain steady, but we do think that it may eliminate some of the competition as the rate’s shift and people’s financial situations change.” 

Rochelle Perkins, realtor and managing broker for Garnet Group Indy, agrees that pressure on those looking for homes will remain intense. Further, she adds, “It almost feels like the rest of the country just discovered Indiana.” 

Out-of-state cash investors have been flocking to the state, where they can often get more “bang for their buck” compared to properties in their own markets. To compensate for outsized prices, these investors often raise rents – which compounds the issue of achievable housing for Hoosiers. 

Who is the “competition” being eliminated as demand and prices remain sky-high? 

Priced Out of the Housing Market 

Newlywed and new mother Lauren Abdullah describes the challenges – and frustrations – she and her husband have faced in their search for an Indianapolis home. “It would be us and 10, 12, 50 offers at times going in, and then immediately you hear things like, ‘Full cash offers’ or ‘$50,000 over asking price,’ things that we knew we couldn’t remotely compete with.” Abdullah says this has forced her to “reconsider” her dream. 

Abdullah and her family are far from alone. According to NAHB Priced-Out Estimates for 2022, the median new home price in Indiana is $370,500. To achieve this, one would need an income of at least $88,077. Of the state’s nearly 2.6 million households, only 789,096 can afford this. This leaves the majority of households – 1,804,462 – priced out of the market. Even more discouraging, a price increase of just $1000 disqualifies another 3217 individuals/families. 

The answer is more complex than raising wages. Hourly wages are the highest they have ever been; most fast food jobs in Indianapolis, for example, offer $20/hour. At the same time, however, we are contending with the worst inflation in four decades with no relief in sight. Everything from groceries, gas, and vehicles to health care, education and housing is significantly more expensive, so employees are not benefiting from increased wages.  

How Does Indiana Compare to Neighboring States? 

Stories like the Abdullahs, and countless others, are set in states across the country. The median price for a new home in the US is $412,505; 39,205,292 households make the $99,205 necessary to afford this, while 87,527,382 are priced out. Delaware is the only state in the nation in which more households can afford a home than are priced out. 

This is a national crisis. How does Indiana compare to neighboring states? 

*Data from the NAHB Priced-Out Estimates for 2022 

Build Indiana Roots  

Being priced out of the housing market is not an exclusively “Indiana problem.” But Hooisers can work together to support and implement solutions for equitable, balanced, achievable housing. Learn more about the Build Indiana Roots coalition – and join the conversation at https://buildindianaroots.com.