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Indiana Real Estate- Past and Present

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The Indiana real estate prices are red hot. Thanks to many factors, home values across the country have skyrocketed in the last two years. Indiana is no different.

Indiana’s home values have increased by about 15% in the last year and have doubled in value in the previous decade. Buying a home can be a challenge in today’s market, and it looks like housing may only get more unaffordable in the years to come.

Let’s take a look at the Indiana real estate market and how we got here.

Why Are Indiana Home Values Increasing?

The number one reason for the increase in home values comes down to simple economics: high demand and low supply. The number of homes on the market in the last two years is the lowest we have ever seen. At the end of July 2021, the number of homes on the market was down almost 25% from the previous month. While Indiana is doing a little bit better inventory wise today, more homes need to hit the market to keep up with the demand. The bottom line, there are just not enough homes available for sale on the market.

What Is Causing The Surge In Demand?

The main driver of increased demand has been historically low, and sustained, mortgage rates. This made homeownership attainable to many first-time home buyers. Millennials have entered into the real estate market in record numbers, further putting a strain on the inventory. Construction slowed down significantly around 2008 but never really picked back up to where it should have been to meet future growth demands. Construction on new homes is also much lower than it has been thanks to supply chain issues and worker shortages.

How Did We Get Here?

Indiana was hit by the market crash in the early 2000s. Between 2005-2007, home values dropped by 10%. While this was not nearly as much as other hard hit areas like Florida and Illinois, it still put quite the strain on the economy. Indiana’s foreclosure rate was about 5% at the end of 2011. Overall, just about 15 percent of all Indiana mortgages were past due.

market chart

Home values continued falling until 2010, when the median home value in 2010 was only $112,900, leaving many homeowners who were in a bad situation unable to sell their homes since they owed more than the home was worth. With all these foreclosures, there was an overabundance of homes on the market without the demand to create a balanced market.

In 2012, things started to level out and pick up. Home values had steadily increased each year at a sustainable rate. Once 2020 hit, home values exploded. Home values in 2021 were 15% higher than the year before, and today they are even higher! Experts aren’t predicting the huge price increases we saw in the last two years to continue, but still, some growth is anticipated.

Does This Mean We’re In a Bubble?

This is the question on many people's minds. When the housing market crashed in 2007, there were some similarities to today’s market. The main similarity is that demand for homes was sky-high since investors were loading up on homes. Lending requirements were also shockingly relaxed. Lenders were offering sub-prime loans and easy credit. These loans were given to borrowers who did not meet standard lending requirements. Borrowers who were not credit worthy were being approved for home mortgages. Many of these borrowers entered into adjustable-rate mortgages where the interest rates could increase over time. Eventually, many of these borrowers found themselves unable to make their mortgage payments, and a wave of foreclosures hit the housing market.

In today’s market, mortgage lending is much more strict. Borrowers have to show more documentation than they had to in the early 2000s and regulations are in place to restrict some of the corrupt lending practices that lead to the great recession. Another plus for the current market, with the increase in home values in previous years, if a homeowner defaults on their mortgage, the current environment allows for much easier liquidation.

Back to our original question: are we in a bubble? My personal opinion, we are not so much in a real estate bubble, like mentioned previously, but we are more likely in an interest rate bubble. If this is true, it would effect more than just real estate. As long as rates stay low, I expect the demand to continue along with the rise in prices, but if the Federal Reserve ever allows interest rates to normalize, chances are, it will cause homes to be much less affordable for the majority of the population.

What Is Inflation’s Role In The Indiana Housing Market?

As you know, inflation is at a 40-year high. Gas, groceries, you name it; everything costs more than it used to.

Picture of inflation

In an attempt to curb inflation, interest rates were increased in mid-March. Rates were at historic low levels for the last few years, and they are now teetering around 5%. This is still a reasonably low interest rate compared to the 7-8% historical average.

One thing that has not kept pace with price increases are pay rates. Wages are not keeping up with inflation, which puts a strain on many families. The increased mortgage rates plus increased home values could make homeownership unattainable for many potential homeowners, which could decrease the demand for housing. The decrease in demand would alleviate some of the strain on the real estate market and slow growth.


If you’re a homeowner in Indiana, it is still currently a seller's market, and homes are selling quickly! As we discussed, home values are high, and if you are able to avoid capital gains penalties, you could sell your home and make a tax-free profit.

Since homes are selling so fast, it has never been easier to sell your house as a For Sale by Owner. If you are interested in learning more about how you could maximize your proceeds, call The Selling Table today to get started!

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