Indiana Real Estate Market Trends & Analysis


The Indiana real estate market has seemingly ignored the fact that the rest of the country has tempered its real estate expectations. Largely in part because of the same inventory shortage facing the rest of the country, real estate in Indiana is expected to continue rising in value for an eighth consecutive year.

Indiana appears able to maintain its momentum thanks to a combination of favorable economic indicators, not the least of which include low interest rates, better employment numbers, and higher wages. Indiana’s current market conditions bodes incredibly well for sellers and their communities. However, inventory restrictions are posing a challenge to buyers. As a result, those looking to acquire a home should go into the process ready to make an offer, which suggests financing should already be in place.

The Top Indiana Real Estate Markets


While the best real estate market in Indiana is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Indiana Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Lenders, Real Estate Agents, Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 5 - 7 months
Notice of Sale: Sheriff
Redemption Period: None

Taxes

Income Tax: 3.30%
Corporate Tax: 8.50%
Sales Tax: 7.00%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.85%
Property Taxes by County: http://www.tax-rates.org/indiana/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,440.00
Transfer Fee: No Fees
Origination Fee: $1,796.00

Overview


  • Median Home Value: $147,400

  • 1-Year Appreciation Rate: +8.1%

  • Median Home Value (1-Year Forecast): +4.0%

  • Median Rent Price: $1,145

  • Price-To-Rent Ratio: 10.72

  • Average Days On Market: 59

  • Unemployment Rate: 3.4% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 6,691,878 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $52,182 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 11.27%

  • Foreclosure Rate: 1 in every 2,158

Median Home Prices In Indiana


Median home values in the Indiana real estate market have become the beneficiaries of several favorable conditions, not the least of which are the same indicators boosting prices across the country: a distinct lack of inventory, improved optimism in the real estate sector and a stronger economy. If for nothing else, more buyers are able to actively participate in the market thanks to improving working conditions, opportunities and wages. However, there simply aren’t enough homes in Indiana to satisfy the state’s growing demand. As a result, homeowners have been able to piggyback off of the resulting sellers market and increase prices for the better part of a decade.

Today, the median home value in Indiana is $147,400. On the way to their current level, Indiana home prices have increased year-over-year since 2014. In January 2014, in fact, the median home value in Indiana was as low as $104,000. Since then, prices have increased 41.7%. To put things into perspective, the median home value in the United States increased 40.8% over the same period of time.

It is worth noting, however, that while appreciation rates in the Indiana real estate market have outpaced the country as a whole, some of the largest gains have taken place in the last year. Median home values in Indiana have appreciated at a rate nearly twice as fast as the national average in the last year (September 2018 to October 2019) — 8.0% and 4.8%, respectively.

While appreciation rates in Indiana mirrored national trends for the better part of a decade, the differences in recent history may be attributed to its close proximity to Illinois. For quite some time now, the state of Illinois has impeded the progress of its own housing market by implementing prohibitive homeownership taxes. Consequently, prospective buyers in Illinois are crossing state lines into Indiana to seek refuge from high tax rates. As a result, demand in Indiana has gone up, further increasing prices. The influx of buyers should increase home values over the course of next year, to the tune of about 4.5%. The median home value in the United States, on the other hand, is expected to jump a slightly more modest 2.8% over the same time.

Median Rent Prices In Indiana


The majority of markets in the United States witness a very distinct correlation between home values and rents: When median home values and demand increase, the amount landlords are able to ask for in rent also increases. That said, the Indiana real estate market has seen its average rent increase for the better part of a decade. Since April 2013 —when the median rent in Indiana was $919 a month — rents have increased year-over-year for six consecutive years. In that time, the median rent in Indiana grew 24.5%, and is now $1,145. To put things into perspective, the median rent in the United States is currently somewhere in the neighborhood of $1,700; that is, after appreciating 28.4% since April 2013.

The price-to-rent ratio in Indiana is 10.72, which suggests it is more affordable to buy than rent. However, the state’s price-to-rent ratio is only applicable to the state in which it originated. While buying appears to be incredibly affordable in the Indiana real estate market, renting remains an affordable alternative. As a result, demand for both buying and renting has increased in recent history. In fact, a great deal of prospective buyers have been forced to rent because of the state’s lack of available listings. There simply aren’t enough homes to buy, so a large contingent of Indiana residents are relegated to renting until the market shifts.

Indiana Foreclosure Trends & Statistics


According to RealtyTrac, one of the most trusted real estate data and information companies in the country, Indiana has an average foreclosure rate. The distribution of distressed properties in the Indiana real estate market is in line with the country as a whole. With approximately one out of every 2,764 homes in some stage of distress (default, auction or bank owned), Indiana’s foreclosure rate is only slightly less than the national average — 3.6% and 3.9%, respectively.

Today’s foreclosure rate represents a significant improvement over years past. Thanks, in large part, to an improved economy and a more optimistic labor force, a large contingent of Indiana residents have been able to remove themselves from underwater mortgage situations. “In October, the number of properties that received a foreclosure filing in IN was 15% lower than the previous month and 17% lower than the same time last year,” according to RealtyTrac.

Despite recent improvements, there are still pockets across the state that have demonstrated an increased propensity towards higher distributions of distress. Five counties, in particular, have a higher distribution if distressed homes than anywhere else in the Indiana real estate market:

  • Lake (1 in every 856)

  • Pike (1 in every 1,157)

  • Clinton (1 in every 1,209)

  • Miami (1 in every 1,285)

  • Lawrence (1 in every 1,319)



Tax Lien Investing


  • Tax Lien or Deed: Tax Lien State

  • Interest Rate: 10% in 1st 6 Months / 15% in 2nd 6 Months (= up to 25% in 1 Year) / 10% on Overbid Amount

  • Redemption Period: 120 days - 1 Year (depending on property type)

Real Estate Investing In Indiana


Investing in real estate with any degree of success is contingent on several factors. However, there’s one universal “rule of thumb” that takes precedence over just about everything else: attractive profit margins. A deal must show there’s room for profit for investors to consider it worthwhile. With that in mind, Indiana real estate investors should pay special considerations to the state’s distressed property inventory. Distressed assets award savvy investors with higher profit margins than their traditional counterparts, and there’s no larger distribution of distressed assets in Indiana than those which are currently up for auction. Auction homes make up 43.9% of Indiana’s distressed inventory, which means investors searching for profit margins may tip the scales in their favor by attending a local auction.

It is worth pointing out that not all of Indiana’s distressed homes have actually been foreclosed on. To be perfectly clear, 26.2% of the state’s distressed homes are pre-foreclosures. As their names suggest, pre-foreclosures are merely at risk of falling into foreclosure; their owners (for any number of reasons) have failed to keep up with mortgage obligations, and are simply at risk of entering into the foreclosure process.

Each of these distressed scenarios represent an opportunity for investors to secure a deal below market value. Owners behind on payments, for example, may be better off selling to an investor at a discounted price than suffering the consequences that are associated with foreclosure. Auctions, on the other hand, may award investors with the ability to buy the asset from the bank at a significantly discounted price. After all, banks aren’t in the business of holding onto non-performing assets. Any inventory sitting on their books not generating revenue is actually costing them money, so they attempt to recoup the losses at auction.

Fortunately, locating auction homes and pre-foreclosures isn’t all that hard in Indiana. Finding a local auction is as simple as conducting an online search. Finding pre-foreclosures, however, will require a little more work. In order to identify homeowners who are behind on payments (and perhaps motivated to sell), investors should take a trip to their local courthouse, where the information is made available to the public. There, they’ll be able to find the owners behind on payments, and — even more importantly — their address and contact information.

Of course, knowing where to find real estate deals in Indiana is only part of the equation. Once investors secure deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Indiana real estate investors?

Despite nearly seven consecutive years of appreciation, real estate in Indiana is still relatively affordable. Therefore, budget-conscious investors will find rehabbing to be a viable exit strategy. In addition to securing relatively affordable deals, demand is expected to persist in the face of appreciation. All things considered, current market conditions are creating a `perfect storm’ for rehabbers. If prices continue on their current trajectory —as they are expected to — Indiana real estate investors will want to start considering a more long-term approach. In the event prices get too high, a renal strategy may allow investors to offset higher acquisition costs with several years of cash flow.

Indiana Housing Market Predictions


For all intents and purposes, the Indiana real estate market is firing on all cylinders. Housing activity is receiving plenty of underlying support from a healthy economy that appears to be growing stronger by the day. That said, exhibiting 100% confidence in any Indiana housing market predictions is a fool’s errand. Even in a market as “predictable” as Indiana, there are far too many variables to assume anything is guaranteed to happen. Instead, investors must remain patient and listen to what the market is telling them.

Let’s take a look at which Indiana housing market predictions are the most likely to come to fruition:

  • An influx of buyers from Illinois should continue driving up prices in Indiana: In an attempt to avoid high property taxes, Illinois residents are making their way across Indiana state lines in search of housing. Until something is done about the crippling taxes in Illinois, Indiana will continue to see an influx of demand, which will drive up prices in the meantime.

  • Real estate will remain affordable despite more appreciation: In spite of seven consecutive years of appreciation and the increased competition resulting from Illinois transplants, there’s reason to believe Indiana will remain relatively affordable. After all, at their current level, media home values in Indiana are well below the national average. Even though Indiana’s projected appreciation rate is expected to outpace the national average, inventory should remain affordable compared to other states.

  • Demand will remain persistent: Demand in the Indiana housing market is high, and it should remain that way for the foreseeable future. A strengthening economy, historically low interest rates, and optimism within the housing sector should all contribute to a very active real estate industry.

Indiana Real Estate Market Summary


The Indiana real estate market has found itself the beneficiary of a perfect storm. Nearly every important economic indicator is better off today than it was just a few years ago. Demand has remained persistent in the face of growing prices, interest rates are too low to ignore, optimism abounds, and the economy has facilitated an active market. Every participant in the Indiana real estate market, for that matter, has something to be encouraged about: buyers, sellers and — especially — investors.

Sources:



https://www.census.gov/quickfacts/fact/table/IN/PST045218
https://www.bls.gov/regions/midwest/indiana.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/in/
https://www.realtytrac.com/statsandtrends/in/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/in/home-values/
https://www.zillow.com/home-values/
https://www.indianarealtors.com/wp-content/uploads/2019/05/05-Market-Report-PR-2019.pdf

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