Low Inventory Raises Concerns About Indiana’s Future
Indiana’s inventory of for-sale homes was tight even before the pandemic, but as consumer fear shrank surrounding COVID-19, and real estate remained an essential business, interested homebuyers flooded the market - ushering in fierce competition across the state. This boon has led to record-breaking home sale volumes and home sale prices. Statewide, the median home price rose 11.8% from December 2019 to December 2020; year to date, that figure has risen an additional 9.5%. While this competitive landscape has many sellers and agents celebrating, it has also led to record-breaking lows for the state’s active home inventory.
What Spurred This Lack of Inventory?
Indiana has been steadily growing as a prime relocation destination for many families looking for stable jobs, tight-knit communities, great school systems, and lower costs of living. Over that time, the state’s housing inventory slowly shrank with no concerns raised until the pandemic hit. Interested homebuyers flooded the market as mortgage rates continued to hit record lows and the realization that space and safety were top priorities.
Indiana’s home inventory shrank heading into the end of 2020 with the state’s active listing count down 49.8% year-over-year, and the new listing count down 22.7% year-over-year. The state’s current months of supply is only one-and-a-half months, which is well below the recommended six month supply that would constitute a healthy balance of demand vs. available housing.
Although inventory and listings were on the decline, the number of home sales closed continued to increase, stressing to state experts that their inventory concerns weren't going anywhere anytime soon.
“As long as available housing inventory continues its downward trajectory, home prices will keep increasing in this extremely competitive market,” said Jim Litten, chief executive officer of F.C. Tucker Co.
Active Listings Year-over-Year
To show just how low the inventory is in Indiana, the chart below displays the year-over-year change in active listings put on the market:
“The December holiday season had no effect on the dynamic central Indiana residential real estate market we experienced most of last year,” Litten said. “The year 2020 was unlike anything I have ever seen in my almost 50 years in real estate, and I expect this strong seller’s market to continue well into the first half of 2021.”
Are There Plans for New Development in Indiana?
Indiana is springing into action and creating a detailed plan to re-evaluate housing needs as the state attempts to attract and retain its Hoosier workforce. Over the last decade, central Indiana especially has seen a steady growth in population as the suburbs of Indianapolis are being recognized as some of the best places to live in the country.
Governor Eric Holcomb has expressed the need for housing to accommodate the increasing number of workers in the state. The state created approximately 28,000 more jobs in 2020 than the previous year, which is an additional reason why housing is such a hot topic in 2021. It’s great to experience this growth in population and reinforce the workforce - until residents can’t find affordable housing to plant roots.
“[Housing availability] is just as important to us [as] water access, broadband internet access, road access... Housing is critically important no matter where you find yourself,” Holcomb said.
Plans for mixed-use developments specifically around Indianapolis are beginning in 2021 - most notably in Fishers, with construction starting on a $157 million development in the Nickel Plate District. While projects like this will be helpful, the real need lies in residential single-family homes, which has the lowest inventory and is in desperate need of development to house the growing number of families in the state.