When it comes to real estate, we live in two worlds. There is the national market which we hear about on the nightly news— and which is dominated by the boom/bust cycles of the outlandishly priced east and west coasts. The other market- the local market- is the one we buy, sell, and live in. The national effects us mostly in terms of what financing is made available (as those guidelines and prices are set in DC and on Wall Street), and “psychologically” (think of the constant message we hear).
PRICES across the country have risen for 33 straight months, but the amount of the increase is now running just half of what it was a year ago. Locally, we were up 5.4% year-over-year, for the 12 months ending in November. The local average now stands at $174,000. However, the median point (where half of all house sales are above or below) stands at $140,000. The median number is more important to most of us, as that is the market most people relate to. Local prices were growing more last summer and have cooled since (but that is consistent with previous years). Nationally, prices were pushed stronger a year ago when 43% of sales were cash. To be sure, it wasn’t the average guy in the street all of a sudden finding a wad of cash under the mattress and deciding to pay cash for a house. No, not hardly. It was wealthy investment funds, taking advantage of cheap money from the Fed, buying bank repo’s and turning them into rentals. When the Fed-induced bubble got too high, investors backed away and the real market took back over (and by this November only 25% of sales were cash). The investment firms largely skipped over Indianapolis in favor of places like Las Vegas and Phoenix— and we should be thankful they did!
CLOSED SALES in Central Indiana numbered 29,382 (down 2.7% from a year ago). Newscasters blamed this on last winter’s polar vortex. But I’m thinkin’ the job market probably had more to do with it. The official unemployment rate is down, however, if you read the fine print what you discover is that many people have either left the workforce (disability claims, early retirement, cash work, gone back to school) or taken a part-time job without benefits just to get by. Neither of those scenarios contributes much to increased home buying.
FINANCING- mortgage rates hovered in the 3-4% range (remarkably low by any historical measure). And now Fannie Mae & Freddie Mac are coming out with 3% down programs. That may help a few people to buy, however, what I see as the bigger issue is a large number of people waiting out short sales, foreclosures, and bankruptcies which occurred during the great recession.
First time homebuyers increased nationally to 29% of all buyers in November. However, this number is still hovering around the lowest reading ever. Why? The burden of student loan debt? Happy to live at home? Maybe, but a better bet might be job and income numbers among the 20 something set. Another unspoken factor just might be that many saw their parents get beat up in the housing market just a decade ago, and those wounds haven’t fully healed yet.
Locally, houses sold on average for 93% of their original asking price (the same as last year). Most houses sold after reducing their original price, and finally sold at around 98% of the final asking price. Some buyers got shut out because they didn’t pull the trigger soon enough or bring enough ammo to their bids.
All in all, those who wanted or needed to sell were able to do so reasonably close to their asking price. And buyers were generally able to find a good home at an affordable price (and even more affordable mortgage interest rates). I think most people will look back and say that the central Indiana market was rather healthy overall in 2015.