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Indiana cities where home prices rose the most during the pandemic

Mortgage Rates
Posted at 5:01 PM, Apr 28, 2022

INDIANAPOLIS — We're over 2 years into the pandemic, and although most things have been inconsistent, the booming real estate market has been one constant.

Several areas of the state are seeing continued growth as people seek more space, investment properties continue to rise, and an influx of suburbs work to enhance their downtowns.

Zillow's economic research team pulled data for WRTV showing what Indiana metros had the biggest home value increase from February 2020 (right before the pandemic) to February 2022.

The real estate listing company measures this data based on its own home value index. A spokesperson for Zillow told WRTV its home value index "measures changes in property-level Zestimates and captures both the level and appreciation of home values across a wide variety of geographies and housing types. It reflects the typical value for homes in the 35th to 65th percentile range."

The data shows the ongoing trend of Hoosiers moving to more affordable areas. People are coming from larger cities to central Indiana for a lower cost of living. Plus, it indicates the investor purchasing spree for rental properties certainly saw an uptick.

Top 10 Highest Home Value Increases

  1. 37.6% — South Bend
  2. 35.3% — Muncie
  3. 35.2% — Indianapolis
  4. 35.0% — Elkhart
  5. 31.1% — Lafayette, West-Lafayette
  6. 30.9% — Michigan City
  7. 30.6% — Connersville
  8. 30.1% — Auburn
  9. 29.7% — Fort Wayne
  10. 28.5% — Madison

Muncie

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A look at downtown Muncie.

The city with the most significant growth in central Indiana, second in the state overall, is Muncie.

This doesn't surprise Michael Hicks, Ball State University's director of the Center for Business and Economic Research.

Hicks' analysis of Zillow's data is consistent with the big nationwide trend throughout the pandemic, which shows home price spikes in places with pretty depressed housing markets.

"The Muncie metro area, which is really Delaware County, has home prices that are really beneath the replacement cost. So, the pandemic and the geographic movement of households out of central cities, sort of would impact the counties that are on the fringe of a very large metro area," Hicks told WRTV.

There are two factors — although minor — to take into account, Hicks says. First, some people move out of Indy to Muncie because it's a doable daily commute, plus there are lower mortgage rates.

Hicks points out, however, that just because the Muncie metro area's home values rose dramatically during the pandemic, it does not indicate a population spike. Instead, he says it's mainly that Muncie residents have moved out of rentals to become homeowners.

"Maybe they were going to wait 3 years and save for a bigger down payment. But they see really low-interest rates right now. So they decided, 'Well, now's a good time,'" Hicks said.

The population has been declining in the university town for the past 50 years, Hick says.

Additionally, there hasn't been substantial new home construction in over 15 years in Muncie, according to Hicks. Because of this, he adds, low mortgage rates have pushed the prices up in the area.

"[Population numbers are] still not high enough that you're going to see new speculative building occurring in big numbers here, and particularly this year, as mortgage interest rates have risen very sharply in the past six weeks," Hicks says.

Hicks predicts the population will continue to gravitate closer to Indianapolis for easier employment and public services access.

"That's where the better schools are for families that are starting new homes," Hicks said.

Moving back home

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A man rides his bike through downtown Indianapolis one evening in April 2022.

Our capital city is right behind Muncie in the leap of typical home value over the last 2 years.

The average home price in Indianapolis went from about $188,000 in February 2020 to almost $255,000 in February of this year.

According to FC Tucker, one of the state's largest independent real estate firms, they see people moving to Indy from bigger cities like Chicago, Los Angeles, San Francisco, and even Dallas and Denver.

In Denver, for example, the average home price topped $700,000 in March. In central Indiana, according to FC Tucker's latest monthly report, the median home price is $260,000.

"We have seen a lot of influx of people who are moving back here who are from here originally," Connor Simonson shared with WRTV. "Changes with the pandemic allowed them to kind of work anywhere. So, they wanted to come back to a place that had a good standard of living at lower price points."

Growth in investment properties

Simonson says the investor market has also increased in the area.

"A lot of it had to do with liquidity, to be honest," Simonson said.

Early in the pandemic, a loophole in the CARES Act changed how people could take money out of their investment accounts.

Typically, Simonson explained, when someone withdraws money out of their $401K or IRA they have 60 or 90 days to pay it back with no penalty. However, that time restraint was extended to 3 years.

"We've seen a lot of people buying homes in cash, then getting a mortgage after the fact. And that just drove a lot of price competition, specifically," Simonson explains.

Simonson adds that with the extra cash in hand, more people were able to seek out rental properties as investments.

"Those kinds of markets where homes are at a lower segment, and there's a higher appetite for rental properties, is where those investments often went," Simonson said. "That just was harder to achieve in major metro markets."

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'Suburban metros' becoming the move

Simonson says there is definitely going to be continued year-over-year growth for 2022. "Which is saying something because 2021 was pretty, pretty nuts to begin with."

FC Tucker echoes Hicks, noting record lows for new housing inventory.

FC Tucker was seeing about 6,000 homes available for sale at any given time. Over the last 2 years, they've seen the inventory decline to about 1,700.

"That's problematic from a buyer's perspective. And sellers are so worried about where they're gonna go that they don't sell their homes and it becomes this kind of self-fulfilling prophecy," Simonson explained.

Simonson predicts the market will balance out in the next 18 months as inventory numbers increase and the turnover slows down.

As the housing market evens, he predicts more people seeking to move to Indy's surrounding suburbs, like Brownsburg, Avon, Zionsville, and Plainfield.

"They've been doing a really good job developing their own suburban metros, a little bit. While it's not a full-service downtown you'd expect from a major metropolitan city, they have a lot of amenities that were previously only really geared toward urban centers," Simonson explained.

WRTV Digital Reporter Shakkira Harris can be reached at shakkira.harris@wrtv.com. You can follow her on Twitter, @shakkirasays.