Indianapolis Star: Housing market is 'weird' and 'strange.' Prices also are surging.

Home prices are going up. Buyers are frustrated they can’t find houses. Sellers who want to move to either larger or bigger houses are staying put, because they don’t know if they’ll be able to find a house. It’s a conundrum. Read about what experts - like me - are saying in this article published in the Indianapolis Star.

You can see the full story here, or keep scrolling.

If you want to help with the problem and sell your house, let’s talk! Contact me by clicking here!

Indianapolis housing market is 'weird' and 'strange.' Prices also are surging.

John Paul Hyden bought a two-bedroom, one-bathroom single-family home in Broad Ripple in 2017. 

He later decided to sell the house and build a custom home. So this past summer he listed the Broad Ripple house for sale at $189,000 — roughly $29,000 more than he paid for it. A buyer paid full price. 

"That was the whole goal," Hyden said. 

Hyden's story isn't unusual given the current seller's market. Home prices in the Indianapolis-Carmel-Anderson metro area appreciated 7.4% in the third quarter, giving the Central Indiana region the distinction of ranking No. 8 among the 100 top metropolitan areas in the U.S., according to the Federal Housing Finance Agency's Home Price Index. 

Economists attribute the surge in home prices to several factors, including employment growth, a strong job market and scant housing supply. So while there is no end in sight for the current housing market conditions, real estate agents say homebuyers would be wise to manage their expectations and not immediately fall in love with properties they see. 

Expanding workforce plays a role

Indianapolis-Carmel-Anderson isn't the only Indiana metropolitan statistical area where home prices have appreciated.

Gary ranks seventh on the FHFA's Home Price Index with prices soaring 7.9% year over year in the third quarter of 2019. Among states and the District of Columbia, Indiana was fifth in home price appreciation based on the latest federal data. 

Nationally, home prices rose 5% from October 2018 to October 2019, the latest data available.

Lynn Fisher, the FHFA's senior adviser for economics, said the state's job climate is faring better than the nation. 

Preliminary November unemployment figures for Marion and Hamilton counties are 3.1% and 2.4%, respectively, according to the Indiana Department of Workforce Development. Indiana's unemployment rate was 3.2%. 

Nationally, the rate was 3.5%. 

"Employment has grown really steadily since about 2012 in Indiana, so it looks like businesses are expanding or moving to Indiana," Fisher said. "And the flip side of that coin must be that ... home builders aren't building enough houses to keep up with that increase in demand."

Housing supply is limited

Real estate agents and brokers such as Laura Musall and Kyle Morris said housing options are severely limited for empty-nesters looking to downsize and first-time home buyers seeking starter homes. 

The lack of the right kind of inventory — outside of larger family homes with three and four bedrooms in some areas — has contributed to demand exceeding supply. 

Musall, who works with Indianapolis-based real estate company F.C. Tucker, said she has observed that some homeowners who want to buy bigger or downsize are afraid to put their existing homes on the market for fear that the home will sell too quickly and they won't have anywhere else to go.

"People are deciding to stay and maybe do renovations or remodels to their current house, or they're not selling when you typically would expect people to sell," she said. "That's affecting the inventory, and it's causing prices to go up. When houses go on the market, a lot of them are being gobbled up really quickly."

That is what happened to Dillin and Elizabeth Wright, who sold and bought a home last summer. The couple, who are parents to young kids, had been watching the market.

They bought their former Noblesville home when the market was low and decided to sell when its value had climbed. They wanted to use the proceeds to pay off student loans and for a down payment on a new house.

When they listed the house for sale, they received a cash offer within 24 hours and worked out a deal with their buyer to rent the house until they could move into a new home. 

Finding a new home was a difficult process, the Wrights said. They were either outbid or houses would be sold and off the market before they could go see them. The couple purchased a three-bedroom, shotgun-style ranch house they loved in Westfield about a month and a half after selling their previous home and immediately jumped on the opportunity. 

They offered at least $5,000 more than the asking price.

Following the advice of Musall, the Wrights wrote a letter to the seller to set themselves apart from other potential buyers. Elizabeth Wright said she complimented the seller for keeping up the four-year-old house and noted the memories she and Dillin hoped to make with their children there. 

It worked. 

"It was kind of a double-edged sword," Dillin Wright said, adding that the couple was able to pay off their student loan debt.  

"But you know, our house, which isn't significantly bigger than what we currently live in, was $100,000 more dollars than our previous house because of the market." 

Buyers still picky

It's a "strange" housing market, said Musall, who has 14 years of real estate experience under her belt. She started her career right before the Great Recession and the housing market bottomed out and foreclosures were common.  

Musall spends most of her time working in Hamilton County and north Indianapolis. She said she sees fewer foreclosures now, but she is noticing two other threads emerge. 

The current seller's market and supply crunch may be enticing some sellers to list their houses for more than they are worth, and at the same time, it's causing buyers to be pickier. 

"I don't find that buyers are willing to just settle just because there's a lack of inventory. I have buyers, and they will wait," she said. "They don't want to pay so much for the house that if they decide to move in five years that they can't get the money back out of it."

The home was first listed for sale in June. Hyden said he received an offer in three days that was about $3,000 below his asking price. He accepted, but the potential buyer got cold feet after the inspection revealed the house had a septic tank.

The house was listed for sale again in July, and two days later he received an offer that matched his asking price of $189,000. The appraisal, however, came back for about $187,500. 

Hyden said the buyer forked over the cash to make up the difference. 

"I wanted to get out of it and start the process at a new home, but in the back of my mind I knew I wanted to get what I wanted out of it," he said. "I felt like I had pretty much the upper hand the entire time. It's not a bad position to be in this market. That's a little less stressful."

Call IndyStar reporter Alexandria Burris at 317-617-2690 or send her an email at aburris@gannett.com. Follow her on Twitter: @allyburris.