Central Indiana home sales stabilize in 2007

Local housing market shows signs of growth in New Year

INDIANAPOLIS – While most large cities experienced a significant decline in home sales in 2007, central Indiana posted its fifth best year on record. Although overall figures are down 9.9 percent from 2006, residents in the nine-county region closed on more than 27,900 homes in 2007.

Central Indiana’s steady job market along with a slow down in new home construction and lower mortgage rates are indicators that local home sales are on track to strengthen in 2008. Bolstering the outlook are several national surveys and reports from sources such as PMI Mortgage Insurance and Global Insight that rank Indianapolis as stable and positioned to see an early strengthening of the local real estate market in 2008.

According to the latest forecast by the National Association of REALTORS®, nationally existing-homes sales are expected to hold fairly steady in early 2008 and then rise later in the year, continuing to improve in 2009.

“The Indianapolis area continues to have a flourishing economy with great affordability, improving our chances for increased home sales in 2008,” said H. James Litten, president of F.C. Tucker Company’s Residential Real Estate Services Division. “Our local market was challenged in 2007 by a number of economic factors that affected consumer confidence, but I believe the worst may be over and, barring an economic downturn, residential real estate in the area should show signs of improvement by mid-year.”

Marion County experienced the most significant drop in home sales compared with 2006, down 11.5 percent. Although no county saw an increase in home sales in 2007, Boone County had the least decline with 0.9 percent compared with 2006.

Number of Homes Sold

County	2006 Total	2007 Total	# Change	% Change
Boone	860	852	-8	-0.9%
Hamilton	5,862	5,262	-600	-10.2%
Hancock	996	983	-13	-1.3%
Hendricks	2,573	2,285	-288	-11.2%
Johnson	2,240	2,082	-158	-7.1%
Madison	1,697	1,589	-108	-6.4%
Marion	15,306	13,551	-1755	-11.5%
Morgan	991	884	-107	-10.8%
Shelby	540	502	-38	-7.0%
TOTAL*	31,065	27,990	-3075	-9.9%

*This is an average of all activity in the nine-county area, not an average of the other nine averages.

Average sale prices at year’s end in the Indianapolis area dropped 2.1 percent from 2006 to an average of $153,270.

Morgan County experienced the greatest increase in average sales price, up 0.3 percent. Sales prices in six of the remaining eight counties were within one percent of balancing out. Marion County experienced the most significant decrease in sales price, dropping 5 percent to $116,727. Hamilton County maintained the highest average price among the nine counties at $255,822.

Average Sales Price

County	2006 Total	2007 Total	$ Change	% Change
Boone	$258,135	$252,067	-$6,068	-2.4%
Hamilton	$256,641	$255,822	-$819	-0.3%
Hancock	$150,541	$149,279	-$1,262	-0.8%
Hendricks	$166,593	$165,364	-$1,229	-0.7%
Johnson	$152,974	$152,790	-$184	-0.1%
Madison	$83,060	$82,735	-$325	-0.4%
Marion	$122,819	$116,727	-$6,092	-5.0%
Morgan	$137,204	$137,663	$459	0.3%
Shelby	$108,178	$107,786	-$392	-0.4%
Overall*	$156,540	$153,270	-$3,270	-2.1%

*This is an average of all activity in the nine-county area, not an average of the other nine averages.

Homes spent an average of 89 days on the market, six days more than 2006. While most homes in the nine-county area remained on the market for more than 90 days, Hamilton County posted the least amount of days with 81. Madison County homes were on the market the longest with 106, two days more than 2006. Other counties with more than 90 days included Boone (91), Morgan (94) and Shelby (97). At 95, Hancock County’s average did not change.

Days on Market

County	2006 Total	2007 Total	# Change
Boone	88	91	3
Hamilton	76	81	5
Hancock	95	95	0
Hendricks	82	88	6
Johnson	80	90	10
Madison	104	106	2
Marion	82	89	7
Morgan	95	94	-1
Shelby	92	97	5
Overall*	83	89	6

*This is an average of all activity in the nine-county area, not an average of the other nine averages.

Residential real estate predictions for 2008

Jim Litten offers the following outlook for this year:

• We will see an early strengthening of the local real estate market in 2008 and a 1-2 percent increase in real estate sales in 2008 over 2007 numbers. While most large cities experienced a significant decline in home sales in 2007, central Indiana fared much better than some of its national counterparts, posting its fifth best year on record. Our market should rebound more quickly than other U.S. cities, primarily due to our nationally-recognized affordable housing market. While we still face challenges resulting from last year’s inventory and mortgage crisis, recent surveys and reports from national groups such as PMI Mortgage Insurance and Global Insight rank Indianapolis as stable and positioned to see a strengthening real estate market in 2008, further backing this prediction.

• Even in a year of significant foreclosures from the sub-prime debacle, the average sales price in central Indiana remained close to stable, decreasing 2.1 percent to an average of $153,270. This decline is not significant and reflects a market that is holding its value. Similar to other markets, the average sales price for a home in 2008 will fluctuate depending on where that home is located in central Indiana. Some counties have more inventory than others; some counties have more demand than others. The average sales price will rise or fall depending on location and demand. The local economy will also drive average sales prices as new companies develop or expand in area counties.

• Residential real estate inventory in 2008 will continue to decline, a trend that presents optimism for a balancing market in 2008. As new home production continues to taper off as it did in 2007, we will see a downward shift in available inventory, and that’s good news for sellers and the market. The year 2007 saw a decrease in new home construction, due to increased inventory, more buyer ambivalence and rising new home construction costs. We expect builders to continue reducing new home construction, while unloading their current supply of available homes.

• By the end of 2007, 30-year fixed mortgage rates in the Indianapolis market were at 6 percent and the Federal Reserve’s talk of a recession signals greater cuts are expected. This could benefit potential home buyers and those with adjustable-rate mortgages expected to reset in 2008. Interest rates will continue to be watched closely, particularly during the first two quarters of the year as the nation seeks to avoid an economic downturn of any significance. As a result, mortgage rates should go back and forth in percentage points, hovering around 6 percent. While this is not ideal, the bright spot is that Indiana is expected to come out of the foreclosure and mortgage crisis faster than other cities.

• An encouraging economic indicator, while slight, this year is the anticipation of a growing job market, which according to experts is expected to rise 1.6 percent this year. With a prediction of wage growth up 3.8 percent, our economy is expected to remain healthy in comparison to other Midwest states. More companies are coming into the area, particularly in areas like Hamilton County, creating more jobs and income in the local market. All of these improving factors will help improve home sales in the Indianapolis area. Increased business development also signifies a rise in corporate relocations as companies search worldwide to find the most talented employees.

• With the inventory that is available, this could possibly cause a surge of new investors entering the market seeking to strike on a great deal before housing costs start rising again. This is a great time to invest in a home if you’re willing to hold on to the property as the local market continues to balance out. We expect to see more investors entering the residential real estate market in 2008.