A home under construction at Saddlebrook Farms North shown in 2024. Multiple new homes are set to be constructed in 2024.
Daily Journal file photo
Johnson County Realtors expect mortgage rates to regulate this year after 2023’s sharp increase, but for the inventory of homes to remain low.
In 2023 Realtors worked with many clients who were concerned about interest rates and had a hard time finding a home on the market of the type they wanted to purchase.
In a December year-over-year analysis, Talk To Tucker Realtors found:
- Pended home sales were down 7.5% compared to December 2022.
- Available housing inventory increased 4.5% compared to the same period.
- The average sale price of homes is up 2.8% to an average of $339,308.
Data shows it isn’t just their experience, but this is also being seen across the greater region.
Across Central Indiana, the MIBOR Realtor Association found that while pended home sales increased 0.6% year over year, the total active listings decreased 41.9% year over year. There was an estimated 1.4 months of sales inventory on the market across the region in December, which is very low.
The Daily Journal asked local experts to reflect on Johnson County’s residential real estate market and to offer insights and predictions on the year to come.
Interest rates
2023 was the slowest year for U.S. home sales in nearly 30 years, the Associated Press reported. Increased mortgage rates and low inventory are the primary causes of this.
During the COVID-19 pandemic, federal officials sharply lowered mortgage rates to around 3%. However, they began steeply creeping upward in 2022, said Angie Garard, with Talk To Tucker Realtors. She called the rate hike a “perception issue,” and said what is happening now is actually the rate going back to normal.
“Our high mortgage rates are still average, and, in some instances, low, historically,” Garard said. “I bought my home in 1998 and I had a 7.75 rate, and that is about what the rates were last year. That’s not high. It is high compared to what the rates had been these last couple of years.”
Ron Rose, real estate broker for Indiana Realty Pros, said that some interest rate estimates are expected to average at around 6.5% throughout 2024, which Rose calls an affordable rate for buyers.
“We just saw a period when the interest rates were so crazy low, people got used to the idea that a 3% mortgage would be a decent payment per month,” Rose said. “If you look historically to the past 20 years, 5.5 to 6.5% is pretty normal.”
The current January rate is around 6.7% for a 30-year mortgage. National experts are mixed, but several banking groups are projecting mortgage rates to decrease to 6% by year’s end.
As mortgage rates fall, more buyers are expected to enter the housing market. Garard advised potential buyers to get the home-buying process started now, rather than waiting until rates lower. Waiting will increase competition for properties on the market, she said.
Housing inventory
While interest rates are expected to regulate in 2024, the low inventory of homes has become a focal point for Realtors.
The National Association of Realtors says that existing U.S. home sales totaled $4.09 million, which was an 18.7% decline from 2022.
In 2023, Garard witnessed an increase of people entering the housing market with a limited number of available units. That led to an increase in market values, but fewer sold homes.
The issue of limited home inventory started to come up after the housing market crash, and though many home builders are actively building in Johnson County and around the state, there’s still a deficit, Garard said.
“Builders have been building the last few years, and we are still behind,” Garard said. “We don’t have as many homes as we do buyers. Even though the market has balanced somewhat, homes aren’t necessarily flying off of the shelves like they were two years ago or towards the beginning of last year. It’s still a seller’s market.”
Homes right now are typically on the market for about 30 days before they are sold. Garard predicts roughly the same amount of units available at the end of 2024, with little to no rise in inventory.
Rose has also noticed a drop in the number of homes listed, particularly in Johnson County. However, he doesn’t see the market as a “seller’s market” like Garard. Instead, he sees the current market as “balanced.”
“We have entered into a normal market where buyers and sellers can actually negotiate,” Rose said. “We are not seeing the 15 to 17 offers on a single house with money coming in over the appraised value.”
Newly constructed homes are having a better time attracting home buyers than older homes, he said. Rose has heard from builders that some developers are offering buyers an interest rate of 5.125% on a 30-year fixed loan, which is a difficult rate to compete against.
“The other side of that coin is that some people don’t want to live in a bean field,” Rose said. “Some people want to live in a neighborhood that has some trees and character. I don’t think in my mind that the trend is necessarily toward new homes. I just think that they have an advantage right now because of that lower interest rate.”
Although inventory is expected to remain limited into 2024, Rose said that there is evidence that 2024 is primed for a strong real estate market.
Zillow has predicted Indiana and the Indianapolis area to be the fourth strongest real estate market in the country, Rose said.
“They mentioned that once we get a few homes on the market, we will have significant buyers who are ready to buy,” he said. “I think that people are starting to wise up to the idea that home values are not dropping in Indiana. It is still a strong real estate market. We are definitely not on the decline.”
