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What To Do Now That Indiana’s Property Market Is Cooling

If you’ve been following the Indiana realty market over the past couple of years, you’ll know that it has been something of a rollercoaster. During the early days of COVID, house prices crashed as lockdowns made sales almost impossible. However, they quickly recovered and the market went on to soar for the next two years.

This was the case not just in Indiana but throughout the United States. Factors including low mortgage rates, low supply, and construction delays all led to huge price increases. Only in the past few months have prices started going down again.

It is impossible to state for sure what will happen next. The housing market is extremely hard to predict. But we do have some ideas. First, let’s discuss what you can do if you’re looking for a place to stay.

Rent instead of buying a home

For people looking to buy a home, renting feels like a waste. You are paying a significant chunk of your income into someone else’s bank account. You could be spending a similar amount as an investment towards a major asset.

However, now is probably not a good time to buy. Mortgage rates are high. Houses are still overvalued, even having cooled somewhat, and they are likely to get even cheaper. By waiting, you could get a much better deal in the future.

It is also relevant that the cost of living is expensive, in Indiana and everywhere else, right now. When you rent, you can save money on things like insurance. Renters insurance in Indiana is far cheaper than homeowners insurance. You can also save money on maintenance and utilities.

This is not a commitment towards renting for the rest of your life. Rather, it is only prudent to wait it out in a market that could realistically crash at any moment.

Now, let’s look at what the signs say about if a crash is imminent.

The market is cooling, but…

You might think that the crash has already begun. After all, house prices in Indiana have been going down for the past few months. But the nature of this decline indicates that a crash is not as likely as you may think.

What makes a crash seem unlikely is simply that it hasn’t happened as of yet, even though the conditions are right for one. To understand why a crash is expected, it is important to understand the two sides of the economics behind the boom.

House prices went up because of both high demand and low supply. Low supply caused by the pandemic and other factors was not enough to drive up prices. Only the uptick in demand did that.

There was an easily identifiable reason for the increase in demand: record low mortgage rates. To stimulate the economy, the Fed had lowered interest rates, leading to mortgage rates that made even the more expensive houses affordable.

If that truly was the driver, rising mortgage rates should have decimated the demand. Yet, in spite of mortgage rates being hiked multiple times in 2022, there is still significant demand. Yes, it has dropped off somewhat, which is why we’ve seen a correction. But it has not come close to disappearing.

On the flipside, supply has increased but it is still at quite a low level. Due to recent supply-chain issues in the construction industry, this is unlikely to change for a long time. Unless there is a sudden wave of homes being put on the market, supply will remain relatively static.

Demand will fluctuate

The fact that there is still significant demand for property indicates that mortgage rates were far from the only driver of demand. Identifying the other drivers is tricky, but they still seem to remain in place regardless of their exact definitions. This leads many experts to believe that cooling will continue but it will be a correction rather than a crash.

Demand will fluctuate. The economic impact of interest rate decreases may lead to more demand, while other factors may decrease demand. Once again, this is tough to predict. However, what seems certain is that we are still very close to the peak. Prices are likely to drop, as are mortgage rates.

It might be worthwhile waiting to see what happens rather than buying a home in this market. You’re unlikely to miss out on any great deals, and may land up with much lower mortgage payments in future.

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