The Northwest Indiana housing market peaked with 12,000 homes sold in the seven-county region in 2021 but remains hot.
“The housing market continues to give the impression that it’s hot and it’s hot,” Pete Novak, CEO of the Northwest Indiana Association of Realtors, said while addressing the Indiana Business and Building Progress Foundation’s business and economic forecasts at Ivy Tech in Valparaiso.
Demand is strong but waning, Novak said. It has been declining nationally since the beginning of 2022 and in northwest Indiana since July 2022.
“We’re in the 14th, 15th, 16th month here where we’ve seen a decline in home sales as well,” he said. “Every year since 2021 we’ve seen a significant decline. Between 2021 and 2022 there was an 11% decline and this year it’s down 17%. That’s almost a third of sales.”
But in the past, home sales have dropped by double digits when there were too many homes on the market, Novak said. But in the current market home sales are down because there are so few homes on the market.
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“You can tie it directly to what’s happening with interest rates,” he said. “We saw the crazy housing market during the pandemic. Inflation was rampant and they were trying to bring things down. Interest rates have a huge impact on home sales. The first half of 2022 was positive. The second half of 2022 was not.” positive. “And you can link that directly to interest rates.”
Although home sales are down 17% year to date, median sales prices are still up 3% year to date in Northwest Indiana.
“Normally you would see some correlation there, but that’s not the case,” he said. “Demand has not declined so much that we have a balanced market by any means.”
Last month, just 1,600 homes were listed for sale in Lake, Porter, LaPorte, Pulaski, Stark, Jasper and Newton County, compared to about 6,300 homes listed for sale in 2014, Novak said. The county has about 2.2 months of inventory, which is better than the pandemic but much less than usual. . In a normal market, it takes about five to seven months.
“Interest rates reduce demand, but they also reduce supply,” Novak said. “If you’re a homeowner and you have a mortgage and you have an interest rate of 3% or 4%, that’s a lot better than 8%. So they’re tied up. Home prices are crazy right now, so I’m going to pay a pretty penny for a new home and pay something “Equivalent to twice the current interest rate. So, we are in a dilemma.”
More supply is coming to the market compared to demand, Novak said. The median home price is now about $241,500, but will likely remain flat or decline, he said.
“I would never argue that lower home sales are a good thing, but when you talk about affordability it is a good thing,” he said. “When you’re trying to buy a home, especially for first-time homebuyers or underrepresented groups, it’s been very difficult for them. They need a little bit of relief and we’ll likely start to see that over the next six to 12 months.”
It remains a seller’s market, Novak said. In a normal market, sellers were getting 92% to 94% of the asking price as a result of negotiation.
“There were times during the pandemic when the entire market was getting more than the asking price if you can believe it. That’s how crazy the market is. I don’t think I’ll ever see that again in my life,” he said. . “This is changing. It’s more balanced.”
The area’s market has been strong because it’s an affordable part of the Chicago market.
“When we started, even some of our members wanted to break away from Chicago because we are northwest Indiana,” he said. “The reality is we’re part of the Chicagoland market. Our biggest economic development projects are tied to Chicago. A lot of our job opportunities are tied to Chicago. In the last 10 years, we’ve had an influx of people coming from Illinois. “Sometimes you have to be careful how you say that . We are not encouraging Illinois’ decline, at all. In fact, a Chicago decline would be very bad for us. So we’re always rooting for Chicago’s success and Illinois’ success. But we fight and compete for people who know Northwest Indiana is a suburb of Chicago. We offer things better than some of Chicago’s more popular Illinois suburbs, things like dual bus transportation. “Track to get you to Chicago faster. Some of Illinois’ most popular suburbs are further away than some of our more desirable communities from a commuting standpoint. We’re a more competitive housing market than you see in Chicago and even nationally.”