Indy housing market booms to historic heights
Tyler and Brenda Ewigleben found out firsthand how competitive the Indianapolis-area housing market is when they decided to buy their first home this spring.
They looked at two homes near Downtown that sold within days of being placed on the market and for amounts over the list price. When they found a house they liked in the trendy Fletcher Place neighborhood, they knew their initial offer on the two-bedroom ranch with a loft would have to blow away the seller.
"The home we ended up purchasing," Tyler said, "we actually offered $10,000 over the asking price because we were aware of multiple offers. We felt like we had to if we wanted our offer to be taken seriously."
The housing market began to rebound three years ago. But real estate agents say homes are selling now as fast as they have seen in their careers. Sales close within days, and sometimes hours, of homes being listed. The market is especially fast and furious throughout Hamilton County and the suburbs, but it's also moving quickly throughout Marion County, especially in up-and-coming neighborhoods near Downtown.
Last year, competitive interest rates, job growth and a loosening of lending standards spurred the strongest growth in the region since 2006, according to the Metropolitan Indianapolis Board of Realtors, now known as MIBOR Realtor Association, which tracks data for Marion and 12 neighboring counties. The sales growth is even stronger this quarter, increasing an eye-popping 10 percent from the same period a year ago.
The run on homes has left hopeful buyers scrambling to compete amid a shrinking supply. This has led to historically high prices. The market has not been this robust since it peaked a decade ago.
Recognizing the strength of the market, builders have begun erecting new homes at a pace not seen since before the recession. Housing starts rose 18 percent in the first quarter from the same period a year ago, the strongest first-quarter numbers since 2007.
Real estate agents say those homes are unlikely to be built soon enough or in large enough supply to slake demand. They predict strong sales and a tightening market through 2017.
Jim Litten, president of the residential division at F.C. Tucker, the area's largest realty company, said second- and third-time buyers returned to the market in force three years ago looking for larger homes. Now, he says first-time buyers such as the Ewiglebens are ready to own homes, boosting what already was a strong market. While much has been written about millennials forgoing the traditional American dream of owning a home, he thinks many couples in their 20s have been saving money and paying down debt and are moving from apartments to homes.
"When the market slowed down in 2009, 2010, 2011 and 2012," Litten said, "there were a lot of people who wanted to buy a home but were afraid. If you reflect back to the recession years, so many young people came out of college and instead of getting a home, they moved back in with Mom and Dad or rented an apartment. But now, interest rates are low, unemployment is low and banks are lending money.
"The American dream still lives on."
Hamilton County drives the suburbs
Hamilton County remains the area's strongest market, outpacing other suburbs in the number of listings, pending and closed sales and median sales price.
Market analysts are not surprised. The rising number of employers along U.S. 31 and I-69 has fueled Hamilton County's homebuying market for decades.
Closings were up 6.3 percent to 1,229 homes sold in the first quarter in Hamilton County, according to MIBOR. An additional 2,033 home sales were pending. The median price was $222,000, the highest in the region in the first quarter and a 2 percent increase from a year prior. Sellers could expect to receive almost 96 percent of their asking price, also the highest in the area. A decade ago, the median home price was roughly $200,000.
Indianapolis housing prices likely to keep rising
Median prices have been rising steadily since the housing market returned three years ago. That has been a welcome turn for homesellers. Before the housing bubble broke, prices were kept comparatively low. In the early to mid-2000s, builders received permits for more than 13,000 new homes a year in the region, more than twice the current pace, leading to a buyer's market that kept resale prices low.
Sales are rising in other suburban areas, as well. First-quarter sales rose about 8 percent in Hendricks County, with 507 closings; 2.3 percent in Johnson County, with 496 closings; about 7 percent in Hancock County, with 233 closings; and 1.6 percent in Boone County, with 194 closings.
The region has a pent-up demand with only a 4½-month supply of homes, less than what most real estate experts consider to be a balanced market of six months. Hamilton County has only a three-month supply, a pure seller's market.
Dean Glascock, an F.C. Tucker real estate agent, believes strong schools and continued investment by the mayors in Carmel, Fishers, Noblesville and Westfield on public improvements such as roads, roundabouts, parks, trails and downtown living have driven the market to new heights. Buyers, he said, want to be near amenities.
"There is a real strong desire for walkability," he said. "When I grew up in the suburbs of Marion County, you jumped in the car and drove. But I moved to the west side of Carmel, and today my kids, who are 23 and 25, they like to be able to walk, or at least ride their bikes, to parks or the Monon Trail."
While sales are strong throughout Hamilton County, Carmel remains the most desirable city in which to buy. Jimmy Dulin, a broker with RE/MAX, said homes there from $250,000 to $400,000 are the sweet spot.
MIBOR statistics show 69 percent of homes sold in Carmel in the first quarter were under $400,000.
Bidding wars have ensued. Some buyers have been entering contracts with automatic escalators, for instance, increasing offers by a set amount every time there is a higher bid until they reach a max price.
"The market is strong," he said. "We are really struggling from a lack of inventory. Buyers are looking for homes in that range right now, and they are really struggling."
Homes under $200,000 are increasingly difficult to find, stymieing some would-be first-time buyers.
Hamilton County continues to lead the way in homebuilding as well, accounting for 41 percent of the total new housing market in the metro region. The average price of new homes, though, is $370,334, an inventory that agents say will do little to meet demand of buyers seeking lower prices.
The market is so thin it's forcing buyers to settle to some degree.
In the past, the rule of thumb was that homes with updated kitchens and bathrooms sell fast. Today, real estate agents say, updated homes are receiving multiple offers within hours or days of being listed, but even homes lacking such improvements are selling within weeks. Homes without updates might have sat on the market for months even a year ago.
Not every segment of the market is strong. Homes priced higher than $500,000 are moving more slowly, and sellers may not get their entire asking price. Homes over $800,000, agents say, are the hardest sell.
Matt and Stacia Belanger, both 38, moved to Carmel from North Carolina for a job opportunity. They chose Carmel over other northern suburbs for the schools for their two children and for the sense of community. In the upscale homes they could afford, they found more of a buyer’s market.
After considering fewer than 20 homes, they closed for $630,000 on a home listed for $650,000 in the upscale Cheswick Place in Carmel. The home has an open floor plan good for entertaining friends and family.
"Carmel is a great community with great amenities," Stacia Belanger said. "We also looked at Zionsville and Westfield, but this house really caught our eye."
Downtown drives Marion County
Marion County has seen a homebuying resurgence driven by strong growth in neighborhoods near Downtown such as Holy Cross, Fletcher Place, Fountain Square and Mass Ave. But the market also is stronger than in recent history throughout all nine townships, real estate agents say.
Sales are up 6.4 percent in the county, to 2,628 homes sold, with an additional 4,043 pending in the first quarter. The median sales price is up nearly 6 percent, to $117,500.
Buyers are receiving almost 93 percent of their asking price and even higher in the most desirable locations. Buoyed by the Downtown market, the median price has been climbing steadily for several years, from about $100,000 a decade ago.
The county has slightly less than a four-month supply of homes, a strong seller's market. Condos and townhomes are in shorter supply than houses.
The Ewiglebens, both 24, began looking at homes near Downtown this spring. They had saved money and paid down debt while living in Brownsburg with Brenda's parents after graduating from college.
Their experience was a microcosm of what's happening in the market. They put down offers on three homes before closing a deal. They first looked at a townhome in Holy Cross. After listing the home for three months in 2015 and finding little interest, the owners had taken it off the market around Christmas. They listed it again this spring as the market heated up, and it sold in less than two weeks.
The Ewiglebens learned the buyer had accepted a bid hours before they put down an offer. They turned their attention to a house for sale in Fountain Square. Listed at $215,000, the house drew a bidding war as soon as it was put on the market. The couple were again outbid. The final offer was for $240,000, with a 40 percent down payment.
The couple wound up offering $201,000 on a 1,500-square-foot house in Fletcher Place three days after it hit the market, the highest of three offers they know were made.
Their offer ultimately was accepted, although they ran into what's becoming another common experience in the booming market: the appraiser thought the bidding war overinflated the value of the home.
Real estate agents say bidding wars are driving homes to prices with which appraisers are not comfortable. When that happens, the buyers and sellers can either negotiate a new price or the buyers can make up the difference in cash.
In this case, the Ewiglebens renegotiated and closed for $190,000, still $5,000 higher than the house was appraised. And the home, they say, still needs work.
"We have significant plans for the home," Tyler said in a phone interview as the couple drove to Lowe's to buy home supplies. "I would imagine in the 10 to 15 years we plan on living here, we'll invest $50,000 to $60,000 in it."
Builders have begun trying to fill the increasing demand in Marion County, too.
Sixteen percent of new housing starts are in Marion County, the second-highest market in the area. While the majority of those starts are in neighborhoods along the edges of Marion County, builders have been buying up empty lots near Downtown. The average price for new homes is $226,402 in Marion County.
Glascock said buyers are looking for homes in the $200,000 to $350,000 price range in Marion County and builders are delivering many new homes one lot at a time near Downtown. He would like to see builders buy enough lots in one area to build a larger-scale development.
"It would be wonderful to see a builder get ahold of two city blocks and see a new urban development," he said.
Downtown isn't the only place buyers are looking in Marion County. RE/MAX agents Christie Snapp and Sarah Beth Skidmore said the market is strong throughout the county, with the most sales in Washington Township, in particular Meridian-Kessler, Broad Ripple and Butler-Tarkington.
"I would say the hottest price point is really from $180,000 to $350,000," Snapp said. "It's a little bit of everything, first-time buyers and people moving up."
Areas such as Franklin Township that list homes under $200,000 also are seeing heavy interest.
Michael Lewis and Brittany Cottingham, both 27, have been renting since finishing college. Now they have decided to settle down and start a family and have begun looking for a home.
Lewis said they realized right away they would need to move quickly if they found a home they liked. They placed an offer on a house in Franklin Township the day after it was listed, the third offer made, and scored the 3,600-square-foot home for $187,500, just over the list price.
After renting for years, Lewis said he and Cottingham are excited to have a little more room.
"We are finally in the right position financially," he said, "and in our lives to own a home."
Call IndyStar reporter Chris Sikich at (317) 444-6036. Follow him on Twitter: @ChrisSikich and at Facebook/chris.sikich.