The inventory of central Indiana homes for sale is piling up, but the backlog so far hasn't caused prices to fall, according to experts and industry statistics.
But it remains to be seen whether prices will continue to hold up--or whether home buyers will jump into the market and shrink the supply.
"We didn't have double-digit appreciation growth, so we didn't necessarily overshoot what the market could sustain," said Patrick Barkey, an economist at Ball State University. "But if you're talking to an economist, increasing inventory has got to put pressure on prices."
As of July, the most recent month available, the inventory of existing homes for sale was up throughout the Indianapolis area, compared with the same month a year earlier.
Based on the current pace of sales, it would take 8.2 months to sell the July inventory, according to data from F.C. Tucker Co. That compares with 5.2 months in July 2005.
In a balanced market, where home buyers and sellers have about the same power, the figure would be four to six months, said H. James Litten, president of Tucker's Residential Real Estate Services Division.
In July, Hamilton County fared best, with a 6.2-month inventory, 1.7 months higher than a year earlier. Thinly populated Shelby County fared worst, with an 11.1-month supply, up 2.3 months.
Real estate agents say they've noticed the swing to a buyer's market.
Tracy Ward with Carpenter Realtors in Anderson said homes are moving if priced right, but buyers can get overwhelmed because so many homes are available.
"You just have to help them narrow their choices more," Ward said.
Across the nation, housing prices are falling in many of the markets where they rose fastest in recent years. The Indianapolis area missed out on much of that boom, leaving it less vulnerable to a bust, housing experts say.
Indeed, housing statistics show that local prices, while flattening, aren't falling. The average price per square foot of a home in central Indiana hit $77 in July, a 4-percent increase over July 2005.
In Morgan County, for instance, the sales-price-per-square foot rose over the past year from $69 to $79--even though the inventory swelled from eight months to 9.2.
Such figures don't include new-home construction. The new-home market also is slowing, in part because the rising cost of building supplies, from copper wiring to drywall, is pushing up prices.
As new homes become more expensive, existing homes gain ground. That's one reason existing home prices have continued to climb, said Clarence Weber, a Realtor with Re/Max 1st Realty in Martinsville.
On the other hand, Weber said, a large supply of foreclosed homes available at low cost is putting downward pressure on prices. Indiana had the highest foreclosure rate in the nation in the second quarter, according to Realty Trac, an online marketplace.
Tucker's Litten said the long-term prospects for this market remain good.
"In all my time in the business, I've never seen a real estate slowdown when you had low interest rates, low unemployment and generally OK consumer confidence," he said.
He said other areas such as Las Vegas and markets in Florida are dropping because speculators are no longer pushing up prices.
"We've never had too much [speculative buying] here in central Indiana," he said. Litten thinks local inventories will moderate within a year.
Bruce Bright, president of Re/Max Connection and president of the Metropolitan Indianapolis Board of Realtors, shares his optimism.
"Our market certainly doesn't compare with the rest of the country over the past several years," Bright said. "We've not had the skyrocketing appreciation."
"I can't predict the future, but I don't see [price drops] happening here," he said. Barkey sees positive signs for the Indianapolis area's housing market, as well. He noted that Hoosiers are moving from other parts of the state to the Indianapolis area. He also noted the population in the Indianapolis area includes many young families that are selling starter homes and moving to larger houses.
And if the Indianapolis economy surges, that would give the housing market a lift as well. But Barkey said the outlook is hazy.
"It's amazingly hard to say," he said. Initial data shows a marked slowdown in Indianapolis' economy for the first half, but he noted that revisions always change the data, sometimes dramatically.