According to the latest information from the Commerce Department, recently published in The New York TImes , home sales dropped 33 percent nationwide. However, certain cities in the country, including Indianapolis, Indiana, are doing better than the national average.
When the government tax credit for new home buyers came to a halt in April, a decrease in new home sales was predicted, but it has been far greater than expected. Just to put things in perspective, this is the largest drop since 1963. But, Indianapolis hasn’t been hit as hard.
Indianapolis has never been subjected to the extreme highs and lows in the housing market experienced in other cities across the nation. With low taxes, and home prices well within the reach of the vast majority of Indianapolis home buyers, Forbes recently listed Indianapolis as among the most affordable cities in the country. I’m not surprised.
As an Indianapolis homeowner, I’ve watched home prices sink in other parts of the country ,while our own home showed a much smaller drop. While existing homes are being sold for far less than they would be worth in a better economy (and taking longer to sell than in previous years), new homes can still be built and sold for a profit. The outlook may be even sunnier in the future.
A major factor in determining affordability in the Forbes study was information gathered from the National Association of Home Builders. Data collected were based on home prices in cities with more than 500,000 residents. Also important? The average amount of income that had to be spent on home-related costs, such as property taxes, mortgage payments and insurance.
Again, the fact that Indianapolis comes out ahead is not surprising. From firsthand experience, I know that our property taxes and homeowners insurance are far lower when compared to friends’ rates across the country, echoing the information from the National Association of Home Builders. Even when compared to other Midwest cities, Indianapolis housing costs can be far lower. No longer the sleepy burg once disdained by those on the west and east coast, the city has turned into a very appealing place to live.
With a major basketball team (the Indianapolis Colts), as well as many free attractions, the city is not only affordable, but entertainment costs are also easy on the budget. The Indianapolis Museum of Art and the Children’s Museum draw visitors from across the country – but are conveniently available to Indianapolis citizens any time.
Even before the latest figures were released, Indiana permits for new homes rose 2 percent in May, while the rate of new home and building permits and construction dove to record lows across the country. Buying land in Indiana is relatively cheap.
A fair number of builders are willing to speculate on that land when there is a chance that prices will rise and profits will be that much greater for new homes. When land is so inexpensive, builders are poised to take advantage of major profits in Indianapolis as the housing market improves.
New home prices in Indiana do not show the sharp increases or drops as those experienced across the country. It makes sense that Forbes listed Indianapolis as one of the most affordable cities to buy a home, even after taking the latest national figures for new home construction into consideration. With a relatively low cost of living, 95 percent of the Indianapolis population can afford a median-priced home. This is the highest percentage in the country.
Yes, home costs take a significant bite out of the budget, averaging 20 percent, on average, nationwide. But, factor in the low cost of living in Indianapolis, and it is far easier to make ends meet than in other cities. I’ve been keeping track of new home prices in Indianapolis by poring over Indianapolis new home sales online, as well as by collecting spec sheets for homes listed for sale (spec sheets list a home’s features, as well as sales price).
I’ve seen that many older homes are being bought for very low prices, leveled to the ground and new homes built in their place. If older homes are bought for a song, it can be profitable to build a new home and still sell it for a reasonable price, well within the budgets of many of the city’s citizens. This makes Indianapolis attractive for those wanting to buy an affordable new home, as well as for speculators who are willing to bet that home prices in Indiana will give them a good return for their investment.
New Home Sales Drop to Record Low in May, NY Times, June 23,2010 here
New Builders Target Area Home Market, June 17, 2010, IndyStar, here
Most Affordable Cities to Buy a Home, June 23, 2010, Forbes, here