by Shari Held
THE STATE OF THE GREATER INDIANAPOLIS MARKET IN 2021
“Twenty twenty-one was a record-breaking year,” says Kassi Green, area manager for Doma, a national title company. “For agents and title companies 2021 has just been crazy. I’m confident 2022 will be a strong year. I just don’t think we’ll experience the level of intensity we did last year.”
During 2021 several trends emerged in residential real estate. One was the rise in the value of homes. From a national perspective, data from CEIC, a global economic and investment research company, shows the average growth rate for U.S. house prices is 5.3%.
“In general, we saw a 15% or more gain in home values in the area in 2021,” says Justin Steill, Realtor® at Homes with Steill Berkshire Hathaway HomeServices Indiana Realty, a full-service real estate brokerage and lifestyle company representing clients throughout Hamilton County and the Greater Indianapolis areas. “According to MIBOR REALTOR® Association, the average home sale price for November 2020 in Hamilton County was $340,000,” Steill says. “And in November 2021 it was $377,000. That’s a pretty significant increase.”
“Property values are still much lower here than in many other cities comparable to Indianapolis, like Atlanta or Chicago,” Steill says. “Forbes ranked us as one of the top housing markets in the U.S. That’s why so many people are moving here.”
Another trend was that mortgage interest rates remained stable. According to Freddie Mac, for most of 2021, they stayed within half a percentage point – a smaller range than previous years.
So, what’s ahead for the housing market in 2022? More of the same? Or are some big changes coming our way?
PREDICTIONS FOR 2022
People have been wondering if the residential housing market is headed for a crash. After all, what goes up, must come down, right? Perhaps, but by all indications, the sky’s not going to fall in 2022!
“I think people were predicting doomsday as soon as the eviction moratorium was lifted,” Green says. “I imagine they’ll increase steadily over the next year, but foreclosures are not instant. They can take a year or more. So, foreclosure properties will trickle in the market, but there’s not going to be a big dump of foreclosed properties in the next six months.”
Locally the housing inventory is limited – currently it’s in the 25-30-day range – which will help keep housing prices up. Homes will continue to gain in value for 2022, but at a much slower growth rate. Zillow predicts home prices will rise 13.6% by the end of 2022, while Freddie Mac gives a more conservative 7% increase.
Mortgage rates may rise in 2022, but they’ll remain low at less than a 4% increase. Fannie Mae predicts a 3.4% rise in 30-year fixed mortgage rates by the end of 2022. Steill says this also isn’t likely to prohibit buyers.
All in all, the residential real estate market will remain strong in 2022. That’s good news for sellers. But the slow-down in the rise of home value prices will work in favor of buyers as well.
SELLERS AND BUYERS: MANAGING EXPECTATIONS
In a year when the residential real estate market will be different from the norm, what do sellers and buyers need to do differently to maximize their success? One thing they can do is manage their expectations.
It’s a seller’s market, so does that mean sellers can sell their homes “as is”?
“Sometimes this works, but buyers want a move-in ready home because they know they’re going to have to move quickly,” Steill says. “Some things that can make a home move-in ready at a minimal cost is to add new paint and carpet to freshen it up.”
Just how far should sellers go when it comes to making improvements to their homes? Steill suggests comparing the current price of your home to others – especially the most expensive home in your neighborhood. If making major renovations such as remodeling the kitchen or master bath, touted as the ones most likely to give you a return on your investment, places your house over the top, it’s probably not a good idea. What is a good idea is for sellers to have their homes inspected to catch structural issues or safety hazards and fix them prior to putting their home for sale.
It’s not just sellers that need to manage their expectations. Buyers who want the seller to correct small things risk losing the home.
“One way to maximize an offer is to put a dollar-amount cap on the inspection items you ask for,” Steill says. He suggests leaving the ability to ask for safety and structural inspections in, for your protection.
Another way to help buyers alleviate concerns they might have is to purchase a home warranty that includes appliances and other items such as the HVAC.
IMPROVING THE ODDS FOR BUYERS
With the current shortage of existing homes, buyers need to be nimble to improve their chances of securing a home. The first thing they can do is get pre-approved so they’ll be ready to jump on an opportunity.
Another option that helps improve buyers’ odds is working with a real estate team. Realtors® have knowledge of the market and access to data that non-professionals don’t have.
“Our team adds value by knowing about homes that will be coming on the market prior to being listed,” Steill says,” and we’re able to research them and decide on whether they might be suitable for a specific buyer.”
First-time buyers need to understand the pros and cons between opting for new construction or existing construction. It can take a year or more to build a home, but everything is fresh, new, under warranty, and made-to-order. Existing homes are not made-to-order and will potentially need renovations down the road to suit your needs.
Is it a good time to buy? The answer to that question is what all potential homebuyers want to know.
“Yes, it’s a good time to buy.” Steill says. “If you wait, you’re probably going to pay more in the future and interest rates might potentially go up.”
