Indy’s housing market remains hot; Rising Interest Rates Should Bring Change – Indianapolis Business Journal

Robert and Robin Koza sold their Westfield home last year and recently moved into their new home. (IBJ Photo/Chad Williams)

The fiery seller’s market continues here in Indiana, but the Federal Reserve’s interest rate hike announcement last week may begin to turn the tide toward a more stabilized real estate environment.

Robin Koza and her husband, Robert, sold their Westfield home last August within hours.

“It was during the height of the seller’s market,” she said. “We appreciated that and got a great price for our house.”

The flip side of selling a home so quickly is also buying a new one in a short time, likely at a high price, and competing with other buyers to do so. After months of delays, the Kozas finally closed their new home in Kimblewick, a Del Webb community in Westfield, last week. They have been living in an apartment since last fall while they wait for the end of their construction.

Terri Wegener recently listed her Fishers townhouse after securing a new home in Whitestown with plans to move in August or early September.

“It was like a domino effect,” she said. “We had to put our house on the market and then make an offer within a certain time frame, so things had to go perfectly.”

After a dozen screenings over a period of nearly two weeks, Wegener received three offers on the same day.

“The cash offer we chose was appropriate for our circumstances,” she explained. “The new owners are allowing us to stay in the house rent free for three weeks after closing, they didn’t require an appraisal and paid last year’s taxes. It was a nice package.

Quick sales continue

Wegener’s situation is not unique. Across central Indiana, home sales continue at an unprecedented pace, with many potential buyers ready to offer additional incentives to sweeten their offers.

“[For May 2022] Indianapolis market set another all-time price record with a median sale price of $287,625, a 12.8% gain over last year,” said Shelley Specchio, CEO of the MIBOR Realtor Association. “Despite the increase, buyers remain keen to buy homes with the average days on market at a record high of just 13 days, up from 15 days last year. The rise in prices, coupled with stocks better, but still tight, and fewer days on market make it an extremely competitive market.”

While Indiana, and the rest of the country, remains a seller’s market, trends point to change ahead.

“We’re definitely still in a position where there are more buyers than sellers, but things are slowing down a bit,” said Chris Watts, vice president of public affairs for the Indiana Association of Realtors.

Watts slightly disputes the notion of a housing bubble bursting.

“What we’re seeing here in Indiana and across the country is more of a legitimate supply and demand issue,” he explained. “On the housing supply side, we’ve seen that inventory, which we measure by listings per month, has been declining since 2011. We’re not building as many homes, and until the last two years, homes turned around at an increasingly slower pace.

Migration is another factor impacting central Indiana’s inventory.

“Since 2018, people have been moving to Indiana in greater numbers,” Watts said. “We are gaining in population, but we are not gaining in housing supply. It’s really the dynamic that drives the price increases, which were already happening before Covid. The pandemic has driven up demand as people enthusiastically re-enter the housing market and we have seen price increases accelerate.

Impact of interest rates

The big topic on everyone’s mind, however, is interest rates. Last week, Federal Reserve Chairman Jerome Powell announced that the Central Bank would raise interest rates by 0.75% in a bid to stem rising inflation, the largest rate hike since 1994.

For potential homebuyers in today’s market, interest rates above 6% could mean adding hundreds of dollars to monthly mortgage payments.

“That’s important, especially when you’re talking about a first-time home buyer trying to save for a down payment and figuring out how much they can afford,” Watts said. “We might push some people out of the market, which would be a shame.”

FC Tucker estate agent Laura Musall also expressed concerns about affordability.

“Nobody wants to see rates go up,” she said. “However, I think [the interest rate increase] will help stabilize some things. In the spring, if you wanted to go see a house, it felt like a block party. We’re starting to see a shift in the market where it’s not as much of a buying frenzy. »

Musall cautions buyers against getting too attached to the interest rate, urging them to look at the bigger picture instead.

“I see buyers going online all the time trying to buy the best interest rate,” she said. “You have to think about all the financing costs, and it’s important to have a lender who can explain that to you. An advertised rate doesn’t tell you the whole story.

Some experts predict that rising interest rates will have a normalizing effect on housing demand and selling prices across the country.

While higher interest rates can mean a higher mortgage payment, they can also mean buyers won’t have to compete with dozens of other bidders for a single home.

“I think it will give buyers some confidence,” Musall said. “When you walk in and see a house as a buyer and there are crowds of other people watching, it freaks you out and you could end up making rash decisions. People who don’t have a lot of money to offer may feel like they can’t compete.

Adjust expectations

Sellers still hoping to take advantage of current market conditions may want to consider signing up sooner rather than later and adjust their expectations.

“It’s still a seller’s market, but that doesn’t mean you can just put a listing in your yard and get multiple offers right away,” Musall added. “You always have to price the house and the house always has to be in good condition. You don’t need to get 20 offers to sell your house. You just need a good solid offer.

From a seller’s perspective, Wegener advises potential buyers to present their best proposition upfront.

“Cash offers are superior and the little extras make them more attractive,” she said.

Even when market conditions change, real estate remains a smart investment when it comes to building equity and accumulating wealth. Watts simply advises potential buyers to be realistic about what they can afford.

“An analogy that comes to mind is your 401k,” he said. “Any financial adviser will tell you that one of the dumbest things people do is try to time the market. It’s the same with the housing market. If you feel ready to buy and it’s a good decision for you financially, historical trends indicate that if you stay in a home for several years, it’s still a good investment.”•

Stephen V. Lee