Residential Real Estate

Shelley Specchio: We’re encouraged to finally see interest rates make their way down. But higher interest rates are just one of the factors making it difficult for first-time home buyers. Higher home prices also make affordability a big challenge, especially when trying to come up with a down payment for first-time home buyers. Limited inventory, higher interest rates, down payment requirements—all these forces, together, have challenged affordability. Reducing one of these factors can help ease some of the pressure first-time home buyers have been experiencing.

Mark Fisher: Indiana has traditionally been a very friendly state for first-time, younger homebuyers, which is also an asset in attracting and retaining talent. Our homeownership rate among those under 35 years old is nine percent ahead of the nation. But the combination of high mortgage rates, rapidly rising prices through the pandemic and a limited supply of homes for sale has hit first-time buyers everywhere.

We do see signs of progress for 2025, starting with mortgage rates finally heading toward 6% and lower. While home values aren’t going down—actually a positive sign of a healthy housing market—the rate of appreciation has slowed dramatically. We’ve also seen this year more homes listed for sale at below $250,000 and even under $150,000, on average, than in 2023. So, there are more options at what would be considered “starter home” prices.

Mark Fisher: Some trends favor homebuyers heading into 2025. This period of higher mortgage rates has caused the market to adjust to a slower pace and fewer buyers; Indiana’s median home price grew by 4% in 2023 and about 3.5% so far in 2024, compared to 14% in 2021 and 12% in 2022!

The inventory of homes for sale across Indiana has also been rising since spring. As we sit here in mid-September, there are about 14,000 listings available across our eight MLS marketplaces on a given day. That’s the highest level since January 2020, which is good news.

To take advantage of lower rates and slower price growth, buyers should go into their search with a firm idea of their budget, make sure their financing is in order and be ready to be decisive when they find a home that checks their boxes.

Shelley Specchio: The housing market has largely been a “seller’s market” because inventory has been limited. We are no longer seeing the prices we experienced during the pandemic, but sellers are still receiving approximately 98% of the asking price. We are seeing signs that buyers might be getting some room to negotiate, or at least buyers’ expectations have begun to shift. How this plays out in 2025 will largely depend on how supply and demand shift in the world of lower interest rates. We expect inventory will remain tight, however, so it’s likely that listings will remain competitive.

Shelley Specchio: It’s so important because inventory is still very tight and will continue to be tight in the coming months. Not only does new housing offer options for first-time buyers, it also provides opportunities for existing homeowners who may be looking for their next home, opening up more existing homes to the market. Household formation is much different today than it was in the past and we need a variety of housing sizes and types for changing household sizes. One size and type does not fit all homebuyers’ wants and needs. Single-family homes, paired homes, townhomes, condos, and multi-family are all desperately needed.

Mark Fisher: New development is very important in 2025 and beyond. Even though more homes are available for sale on a typical day this year, Indiana still has a long-term housing shortage. In the past decade, we’ve grown by more than 250,000 new households but we’ve built less than 173,000 new housing units. We need to ramp up residential development to catch up from years of underbuilding after the Great Recession. Adding to this challenge, Indiana has generally older housing stock than the U.S., so replacement and renovation must be part of any blueprint for residential recovery.

Mark Fisher: Indiana’s housing market is typically dominated by single-family homes. In fact, less than one in 20 sales is a condominium or attached townhome. Condo sales have been most common in Bloomington and the Indianapolis area, but over the past year Fort Wayne has moved ahead of Indy in terms of the share of sales of condos and townhomes. It’s likely that downtown redevelopment along Fort Wayne’s riverfront is driving that trend. We’ve also seen a bigger market for condos in Kokomo, Evansville and Michigan City.

In many of our larger cities across Indiana, we’re seeing some of the highest demand—at least as measured by price gains—for older homes in the historic, walkable neighborhoods close to downtown business districts.

Shelley Specchio: Multi-family style housing is still booming in the Indy market. Townhomes are also in demand, up nearly 30 percent, year-to-date. In fact, building starts for townhomes have jumped 67 percent over last year and 18 percent over 2022. Some of this demand is driven by aging populations wanting to downsize into a more manageable product, while some consumers can find them relatively more affordable, compared to a single-family home.

Mark Fisher: The Indianapolis metro continues to be our largest market by far. Indy accounts for 40% of all home sales in the state, and it’s a more active market than the state when it comes to sales and listing activity on a per household basis. Fort Wayne also has a strong real estate market as the Midwest’s fastest-growing large city, with home sales running ahead of the statewide trend for the last two years. Large manufacturing and data center investments are also boosting housing demand around South Bend, Michigan City and especially in Kokomo. Along the Ohio River, Clark County is among Indiana’s fastest-growing counties. It’s adding residents at a much faster pace than the rest of the Louisville metro. It’s also interesting to note that Indiana’s rural counties have slightly outperformed statewide sales trends over the past 24 months; among other factors, there’s an appeal to median home prices that are more than 20% lower than the state as a whole.

Shelley Specchio: One of the strengths of the central Indiana market is the variety of options for consumers within a relatively short distance. We have wonderful urban, suburban, small town, and rural communities. Many consumers are drawn to the strong communities, great schools, jobs, health and fitness, housing, nightlife, diversity, and outdoor activities found throughout central Indiana.  There are pockets throughout central Indiana that are outperforming the region, such as Sheridan, Danville, Traders Point, and Morgantown. Just outside the Indy metro area, we see areas like Westport, Cloverdale, and North Vernon performing well. The bottom line is that communities that continue to invest in quality of place are the areas seeing the most growth.

Mark Fisher: We’re excited about the potential of the state’s READI program, which is investing more than a billion dollars over two rounds of funding to support quality of life, talent attraction and other priorities for economic competitiveness across all regions of the state. Nearly half the funding has been earmarked for housing and mixed-use residential projects.

We’ve done an analysis that shows homebuyer preferences shifting to more walkable neighborhoods with a mix of housing and commercial properties. So, we’d encourage local officials looking to attract more residents and build a stronger property tax base to look at adjusting their land use policies to promote housing density while making investments in pedestrian-friendly infrastructure. The payoff could be a 10% to 20% increase in residential property values.

Shelley Specchio: Many central Indiana communities are making investments in quality of place projects, such as the expansion of trails, parks, and public art. The impact of the Cultural Trail and Monon Trail are perfect examples of how quality of place investments positively impact neighborhoods and housing.

I’m really encouraged by the many projects that will drive new investment in and around central Indiana. The completion of I-69 and Clear Path 465 will certainly have a positive impact and provide significant improvements throughout the area. The Lilly project and development of the LEAP District in Boone County is expected to create additional growth in Boone County and beyond.

Other key projects include IU Health Downtown Hospital, 16 Tech Innovation District, Elanco Global Headquarters, the Deep Tunnel Project, IMS Museum, Bottleworks expansion, and numerous school projects.

Shelley Specchio: Despite the housing challenges consumers have faced in the last few years, homeownership remains one of the most resilient ways households can build wealth. The central Indiana region continues to see strong job and population growth relative to neighboring markets. These factors will continue to support positive demand for housing. But with this growth, we need to think collaboratively about how we can increase the supply and diversity of housing not just to support this new growth but also to serve the needs of our current residents as their housing needs change.

Mark Fisher: We’ve talked a lot about the challenges facing homebuyers, but let’s remember that most buyers are also sellers, and I want to say something to the homeowners who are thinking about listing their homes in the year to come.

A more balanced market doesn’t mean a bad market to sell a home. The supply of homes for sale might not be as tight as it was back in 2021 or 2022, but it’s still well below pre-pandemic norms. A fresh listing at a competitive price is still the most valuable asset in Indiana real estate. Homeowners have built unprecedented equity wealth over the last four years, and property values are still rising. So, as mortgage rates move lower, 2025 may be the year to take another look at those moving plans you’ve delayed or dismissed.