Even though real estate activity across much of Indiana slowed this spring after a surprisingly strong start to 2023, our housing market seems to be heating up again for Hoosiers looking to buy or sell a home this summer.
Indiana homebuyers seized on increased inventory and falling mortgage rates to jump back into the market quickly this year; statewide home sales surged 60% from the end of January through March. But sales outpaced new listings as sellers took longer to come off the sidelines and the average daily number of homes for sale dropped from 13,000 in January to just over 8,000 at the end of March.
Faced with fewer options, buyers pulled back; monthly sales declined from March to April and finished 19% below 2022 (after March fully closed the year-over-year gap).
There’s reason that potential sellers have been more cautious: senve of ten outstanding mortgages have a rate below 4% and current homeowners considering a move are thinking twice about finding and financing a new home near 7%. With fewer listings of existing homes and new construction playing catch-up with population growth, recovering demand is limited by available supply.
But after hitting ‘pause’ in April, both buyers and sellers seemed to regroup and even rally as we look ahead to summer. New listings grew 14% and closed sales increased 18% in May versus April.
Despite many being locked into lower rates, favorable trends are luring more listings onto the market – starting with rising sale prices. U.S. home prices have now dropped three consecutive months, while Indiana saw another increase to our median sale price, which was $255,000 in May.
There are other signs of enthusiastic homebuyers pursuing a limited inventory: Homes are selling faster, averaging under a week, or about six days, from listing to pending contract in May.
Homes are also selling for 98% of their original list price, up from 94% in January and above Indiana’s five-year norm of 97%. These are persuasive numbers for hesitant sellers.
As new listings trend upward, total supply is stabilizing, too — climbing back towards 9,000 daily listings even as May sales rebounded.
That brings us to the good news for homebuyers. Inventory remains historically low by pre-2020 standards, and buyers should be prepared to be decisive if they find the right home. But the market isn’t as tight as it was in 2021, and active listings remain 25% above 2022.
And though prices are higher, annual appreciation slowed to 4% in April and May; Indiana’s median price was rising 16% year-over-year last spring. The market is more balanced, especially for buyers ready to put down long-term roots and refinance with lower mortgage rates.
The old cliché about the three most important words in real estate — “location, location, location” — was replaced years ago by “inventory, inventory, inventory” as the top issue for Hoosier homebuyers. Elevated rates continue to impact the market, and we’re encouraged by new investments in future housing development passed by the General Assembly this year. All the same, Indiana is still gripped by a housing shortage.
And with Indiana leading the Midwest in population growth, the laws of supply and demand continue to put sellers in a strong position. But the same trends make buying a home here a good investment for the future – and after a challenging 2022, buyers seem ready to explore their options in a real estate market that’s still more balanced than it has been to start the past two summers.
Lynn Wheeler is the senior vice-president of Berkshire Hathaway HomeServices Indiana Realty and 2023 president of the Indiana Association of Realtros; learn more at www.IndianaRealtors.com. Send comments to [email protected].
