Indy area home foreclosures see dramatic spike

INDIANAPOLIS (WISH) - New statistics show Central Indiana's housing market may finally be poised for a rebound. But, they also show a familiar problem may be on the rise: foreclosures.

As the National Association of Realtors’ hosted its annual National Open House Weekend event, potential home buyers like Chris Ratay of Zionsville fanned out across Central Indiana, hoping to take advantage of a buyers' market while they still can.

“We're empty nesters now for the first time in 20 years and we're excited to look for a nice new home here closer to downtown,” Ratay said while touring an open house with his wife Sunday afternoon. “I believe this may be the last time in my lifetime that I can take advantage of the housing prices where they are, and even more importantly, the financing.”

Asked if he felt the market was shifting back away from buyers, Ratay nodded.

“Things that we have looked at that were for sale just a few weeks ago are not for sale any longer,” he said. “So, it seems to me that things are picking up.”

First quarter sales data seems to support that theory.

According to the Metropolitan Indianapolis Board of Realtors (MIBOR), existing home sales in Central Indiana rose by 18.3 percent in the first quarter of 2012 compared with the last quarter of 2011 to an average of $118,500. That pushed first quarter closed sales 7 percent higher than one year ago.

MIBOR also reported the median sales price of all Indianapolis area homes up by 4.9 percent from the previous quarter, and up 2.0 percent from the previous year, though new listings were down 10.8 percent from the previous year. The number of available homes on the market also dropped for the first time in more than a year, to an inventory of 7.8 months.

“We've seen it as high as 9.5 months,” said MIBOR Communications Director Claire Belby. “So, that's a positive trend for everybody, because, that's really a more balanced market. For the last 2-3 years it's been a very heavy buyers' market. There have been a lot of properties on the market. And, that means it takes longer to sell. There's some downward pressure on price. And, it's starting to even out a little bit.”

But, while home sales have increased, so have the number of homes in foreclosure. In the Indianapolis metro area, new data shows a dramatic spike.

According to RealtyTrac, Indianapolis foreclosure activity rose by 37 percent in the first quarter of 2012. That’s the second highest 3-month jump in the country, behind only Pittsburgh. The realty data company also listed Indianapolis’ one-year foreclosure increase of 41 percent as the second highest in the nation, behind the Orlando metro area.

“It's still a pretty heavy part of the market,” Belby acknowledged. “About 25 percent of the market are still foreclosures.”

Carmel ReMax Sales Manager Jim Morgan told 24-Hour News 8 the jump in foreclosure filings was not unexpected. He says option adjustable rate mortgages signed before the sub-prime mortgage crisis in 2007 that are now "re-setting" are responsible for some of the increase.

The Associated Press also reports large banks are stepping up foreclosures in about half the states after officials settled a dispute in February with five of the biggest mortgage lenders over foreclosure abuses.

Belby says the economy has been the biggest driving factor behind the increase.

“People got into situations that weren't good,” she said. “Then of course, there [are] the unemployment numbers and the housing market not being able to sustain its value. That's not something we saw here in this market. That's what happened in other markets where values just dropped off. Ours are really related to jobs.”

For potential buyers like Ratay, there can be a silver lining. Asked if foreclosures scared him off as a buyer, he shook his head.

"A couple of the houses we're looking at are in foreclosure,” he said. “It's actually relatively exciting as a buyer, because there are some great deals to be had, if you can be patient and are in the right situation.”

But, for those who aren’t buyers, the affects of the growing number of foreclosures can be far reaching.

"The negative is really realized in price, because the foreclosures put downward pressure on price overall. The median price of a foreclosure property is around $60,000, and the median price of a traditional home with no foreclosure in the picture is about $135,000. So, that means our median price overall ends up being about $120,000 or $118,000,” Belby said.

According to RealtyTrac data, foreclosed homes sell for around $50,000 less on a national average than similar homes that haven’t been foreclosed on. Often, that drives prices on other listed homes in the same market down. It can also negatively affect the value of your home, even if it’s not on the market.

But, Belby expects the spike in foreclosures to be short lived, at least locally.

"New foreclosure listings have slowed dramatically,” she said. “We're only seeing about 15 percent of all new listings being