Existing-home sales in central Indiana fell in September for just the sixth month in the past three years—an indication that subpar home-buying conditions are creating a growing drag on residential sales.
In the 15-county area, closed home sales fell 2.5 percent, from 3,226 in September 2017 to 3,144 last month, according to data from the MIBOR Realtor Association. Area sales have fallen in three of the past seven months on a year-over-year basis.
Housing affordability hit a 10-year low this summer due to rising prices, higher interest rates, low inventories and increased building material costs. And home prices are rising faster than household incomes.
Home sales have been surprising robust in central Indiana this year but are on a six-month slide nationally.
“Some economy observers are pointing to 2018 as the final period in a long string of sentences touting several happy years of buyer demand and sales excitement for the housing industry,” MIBOR said in its monthly report. “Although residential real estate should continue along a mostly positive line for the rest of the year, rising prices and interest rates coupled with salary stagnation and a generational trend toward home-purchase delay or even disinterest could create an environment of declining sales.”
The total number of active home listings in the region dropped 13.6 percent, from 9,589 at the end of September 2017 to 8,288 at the end of last month. New listings rose 3.1 percent, to 3,697.
The average area home sales price during the year-over-year period increased 6.5 percent, to $211,920. The median price rose 9 percent, to $179,900.
Home owners across central Indiana in September got an average of 95.9 percent of their original list price when selling their houses. That was down from 97.2 percent in July.
Pending sales in the area were up 8.5 percent, to 3,043.
In Marion County—typically the most active market in central Indiana—closed sales in September dropped 1.3 percent, to 1,243.
The average sales price in the county rose 6.2 percent, to $173,534. New listings rose 6.8 percent, to 1,562.
The inventory of single-family detached houses in Marion County was down 9 percent, to 2,894. The townhouse-condo inventory fell 19.8 percent, to 319 units.
In Hamilton County, sales sank 6.2 percent, to 558. The average sales price rose 2.8 percent, to $300,319. The inventory of single-family detached houses fell 11.4 percent, to 1,535.
In Hendricks County, sales decreased 4.5 percent, to 275, while the average sales price ticked up 3.9 percent, to $219,294.
In Johnson County, sales jumped 15.4 percent, to 270, and the average sales price shot up 12.9 percent, to $221,924.
Sales in Boone County ticked up 0.9 percent, to 117, as the average price of a home soared 17.9 percent, to $337,595.
Hancock County sales dropped 23.3 percent, to 112, and the average price rose 12.8 percent, to $211,628.
Sales were down 1.9 percent in Madison County, to 155. The average sales price increased 1 percent, to $122,327.
Morgan County sales dipped 4.2 percent, to 92, and the average sales price jumped 11.2 percent, to $217,601.
Shelby County saw 48 closed home sales in September, a decrease of 15.8 percent. The average price rose 12.9 percent, to $150,780.
U.S. home sales fell for the sixth straight month in September. The National Association of Realtors said Oct. 19 that sales declined 3.4 percent last month, the biggest drop in 2-1/2 years, to a seasonally adjusted annual rate of 5.15 million. That's the lowest sales pace since November 2015.
Housing has found itself in a downturn in recent months despite the unemployment rate falling to a nearly half-century low of 3.7 percent.
The major culprit for the decline in homebuying appears to be higher borrowing costs.
Average 30-year mortgage rates climbed to 4.85 percent this month from 3.88 percent a year ago, according to mortgage buyer Freddie Mac. Increasing interest rates can make homeowners less likely to upgrade to a new property if it requires them to spend more each month on repaying a home loan.
With rents stabilizing in many cities, many would-be buyers may not feel as much pressure to buy a new home.
"Renting itself may be seen as a better bargain as rising mortgage interest rates, still-rising home prices and sluggish wage growth dent the affordability advantage of a typical mortgage," said Aaron Terrazas, senior economist at real estate data provider Zillow.