A Message from CEO Mark Fisher:
For REALTORS®, it’s always back to school season
Across Indiana, students are getting ready to head back to school or already settling into their new classroom routines. For REALTORS®, there’s no summer vacation from education and professional development – a successful career in real estate means doing your homework (just to get that joke out of the way).
Expertise is what sets REALTORS® apart: Encyclopedic knowledge of your communities and the economic and demographic trends shaping their housing markets. Keeping up with industry trends, new technologies and consumer preferences. And staying current on the Code of Ethics and Standards of Practice, knowing that every day brings new tests of professional excellence.
IAR has made education a priority in member benefits, and a learning mindset is especially important now.
Facing the future:
I wrote last month about the legal and regulatory disruptions looming over the industry – the class-action lawsuits aimed at the practice of listing brokers compensating buyer brokers as well as efforts by the U.S. Department of Justice to resurrect previously-settled probes of NAR and MLS compensation and participation rules.
The first class-action suit is set to go to trial in October (Burnett), with the other (Moehrl) scheduled for the first half of 2024. Both cases threaten competitive real estate marketplaces based on a pair of faulty premises – that buyer commissions aren’t negotiable and that sellers don’t benefit from the visibility and access to qualified buyers that the MLS structure offers.
It may be years before these lawsuits are resolved. But we know that REALTORS® who invest in sharpening their skills and knowing their markets will be better positioned to succeed: In particular, buyer brokers with strong credentials and a track record of client satisfaction will be able to negotiate fair compensation and make the case for exclusive representation by describing the services they provide and value they bring to the homebuying process.
IAR’s Real Estate Certification Program has relaunched Graduate REALTOR® Institute (GRI) to help members level up their technical competencies and professional insight, just the type of ‘extra credit’ that can help brokers stand out.
Earlier this month, in fact, RECP offered a two-day, in person GRI event featuring a deep dive into brokerage business issues, cybersecurity and risk management and the latest on artificial intelligence and other groundbreaking technologies reshaping real estate.
Speaking of AI, we’re excited to present a panel on harnessing these tools to benefit your business at the IAR Fall Conference on September 18th – another day of learning with and from fellow REALTORS® that we hope more members will mark on their calendars.
A more challenging market:
The need for REALTORS® to be the authoritative voice of the market is also critically important as the balance of power shifts back and forth between buyers and sellers. July saw sales fall further below 2022 (down 19% year-over-year) as mortgage rates continued to hover near 7%. But tight inventory kept prices high – June and July both saw median sale prices surpass $256,000, a new high mark.
But as we highlighted recently, the downside of mistiming the market is bigger this year even as sale prices keep rising. Price drops as a percent of total inventory are rising as sellers adjust expectations from the spring, and median days from listing to pending inched up from six in June to eight in July. Listing prices are settling lower as well.
After hitting 60 days on the MLS, a home has a 64% chance of a successful sale in 2023 (versus 80% in 2020-2022). One of every four new listings in July were still under contract within three days – but for the properties that don’t command immediate offers, competitive pricing and aggressive promotion make a difference. It’s the difference a savvy REALTOR® (backed up with the most up-to-date data resources from your state and local associations) can offer.
Homebuying 101:
NAR Chief Economist Lawrence Yun said last month that “The recovery has not yet taken place, but the housing recession is over.” Even though the Fed hasn’t loosened its grip on the lending markets quite yet, inflation has fallen considerably and it does seem that the worst is behind us.
As mortgage rates ease and demand starts to recover, REALTORS® will play an important role coaxing first-time buyers off the sidelines. It pays to be knowledgeable on state and federal programs targeted to first-time and low-income buyers – like down payment assistance and other loan products offered through the Indiana Housing & Community Development Authority (IHCDA).
An overview of these programs happens to be part of the latest member benefit CE package offered by RECP for Indiana REALTORS®, along with an inside look at the home appraisal process, a deep dive into case studies from the Code of Ethics and a look at how REALTORS® can insulate themselves from legal, regulatory and market-based risks. (Help us share the new twelve-hour CE package from RECP.)
Knowledge is power:
You get the picture: IAR offers a variety of educational programs and learning opportunities, and I’m thrilled to see members embracing them: The majority of Indiana REALTORS® received at least some of their required CE credits through RECP over the past licensing cycle, and participation in special events and in-person classes is on the rise, too.
It’s tough to tackle special designations and programs like the GRI, CE2X or At Home With Diversity while juggling the day-to-day demands of a profession where every task is time-sensitive. But investing in professional development is always a profitable decision, especially given the complexities of our market and the current challenges to long-established business practices. A more demanding future means demanding more of ourselves – including associations giving members the resources to make the grade.
Inside IAR 7/25/23
View Email
The Value of Challenging Conversations
With nearly seven months in the books, it’s fair to say that 2023 has been an often confounding year as real estate has recovered at an uneven pace. This changing climate has raised the need for frank discussions with customers about the realities of today’s market – dialogues with the longer-term benefit of testing how we talk about the value of working with a REALTOR® as the profession confronts the possibility of longer-term legal and regulatory disruption.
First, a quick review of the up-and-down year-to-date: Sales rebounded quickly to start 2023 before slowing in the second quarter to finish 14% below the first half of last year. But consider that early 2022 was essentially an extension of the record-breaking market of 2021 – homes were still selling briskly and prices were rising at a double-digit pace before interest rates hit 6% towards the end of June.
Despite the drop-off, Indiana has seen demand recover ahead of the national market: NAR reports sales falling 23% over the first six months of 2023 as prices decreased year-over-year for five straight months. Indiana’s median sale price continues to rise (up 5% year-to-date) as inventory remains tight.
As more homebuyers venture back to the market, sellers have actually been more discouraged by elevated mortgage rates. While sales are down 14%, new listings are 17% below 2022…and falling faster since the start of the year.
The ‘lock in’ effect:
While the impact of higher mortgage rates on homebuyers is obvious, they’ve also had the effect of locking more homeowners into their existing properties. Most outstanding mortgages have rates below 4%, and potential sellers are deciding to stay put and keep their current loans (and pre-2022 rates) instead of trying to find and finance another house at rates near 7%.
That leaves new listings 20% behind 2022 from April through June, holding back sales activity.
Homebuyers eager for new listings:
The buyers who are willing to navigate these conditions have higher budgets (or the wherewithal to handle higher monthly payments until rates drop enough to refinance) – sales above $300,000 have only dropped 6% versus 2022 while sales below that threshold have plummeted 18%.
They also seem more decisive when finding the right home: Even with total sales down, Indiana is averaging less than a week from listing to pending contract since the end of March, with sale prices at 98% of original list.
We’ve also seen a close relationship between new listings and pending contracts, both averaging around 2,100 a week since early April. Finally, the odds of a listing selling successfully after thirty days have declined modestly in 2023 – these data suggest demand driven by a smaller group of determined homebuyers who are especially drawn to new options.
Pressures for buyer and seller brokers:
It’s the type of market that adds pressure to both sides of a deal.
Listing brokers have fewer leads and are working through a more complicated calculus with potential sellers struggling with the home loan lock-in phenomenon.
Homeowners have enjoyed massive equity gains (and price appreciation remains positive in Indiana), but they have to consider cooler demand and less favorable lending terms and inventory in making plans to move on. And even though Indiana remains a seller’s market, 2023 shows the need for more aggressive promotional efforts to target buyers early.
The stakes are higher for pricing discussions too (especially dealing with outdated perceptions of the market circa 2020 or 2021); brokers need to bring a sharp sense of recent trends to maximize property values without risking momentum with an overly ambitious list price. (We’ve seen price drops as a share of inventory increase 30% since the beginning of the year.)
For buyer brokers, affordability is a continuing challenge and supply remains historically tight, with less than a month-and-a-half of available inventory (close to the red-hot market of 2021). And homebuyers in 2023 seem more selective but willing to compete for a limited pool of new listings – relying on their brokers to position them for a successful offer.
Learning from Challenging Conversations
In short, the unique dynamics of 2023 are showcasing all the roles that REALTORS® play on a regular basis – financial advisor and family confidant, market expert and marketing guru, cheerleader and counselor. Conveying the many ways REALTORS® bring value to the life-changing decisions around homeownership is likely to become even more important as we look ahead.
As you know, class-action lawsuits attacking broker cooperation on commissions threatens to undercut the ability of homebuyers to afford expert representation (by allowing seller brokers to pay buyer broker commissions). One of these suits, Moehrl v. NAR et al, is set for trial early next year. At the same time, the Department of Justice continues to push for renewed scrutiny of compensation and MLS participation policies (trying to scuttle an earlier settlement agreement).
The issues raised by the commission lawsuits and DOJ investigations are nuanced, but the bottom line is fairly simple: Brokers cooperate to create competitive, pro-consumer marketplaces that benefit all parties – sellers access the largest pool of qualified buyers, who in turn are able to peruse the most comprehensive inventory of homes for sale.
Legal threats to the system rely on the allegation that broker compensation is too opaque for consumers to understand. Depending on the resolution, compensation models and the MLS structure may change – this “open letter” from T360 Consulting outlines some options for the industry to proactively address the issues, and some major MLS marketplaces are breaking with long-established practices to promote flexibility on compensation.
But looking at the bigger picture, the ability to describe the REALTOR® difference – to know your worth – is the best bridge into whatever the future holds.
For buyer brokers, it’s guiding customers through a full-fledged housing shortage to find the right home within their budget. On the seller side, managing expectations and maximizing the sale (without overreaching the market) is a delicate balance that demands a thoughtful strategy.
That’s why the challenging conversations many of our members have been having in 2023 are likely to become the norm. REALTORS® should welcome open and transparent discussion of the services they provide – the roller-coaster of economic, demographic and monetary trends impacting real estate over the past year-and-a-half prove the value of professional expertise and ethical standards on the journey towards buying or selling a home.
Inside IAR 6/15/23
View Email
Five Takeaways from June (So Far)
We’re not even to the halfway mark in June, but Homeownership Month has already been packed with highlights and learning opportunities: We welcomed NAR president Kenny Parcell to Indianapolis for our Indiana Riding with the Brand rally on June 2nd, hosted a successful inaugural Rural Housing Summit the following week, and have continued to watch the market heat up as we count down to the state license renewal deadline on the 30th.
Here are five takeaways worth sharing:
1) The difference is REAL – and so is the value to Hoosiers buying or selling a home.
Whenever I’m with groups of REALTORS®, I’m impressed by the knowledge, work ethic and dedication to customers displayed so matter-of-factly. That’s the spirit behind NAR’s ‘Riding with the Brand’ campaign – reminding REALTORS® of the value they bring, the responsibilities they accept and the high standard they embrace by choosing to be more than a licensee.
Kenny Parcell is a great ambassador and passionate advocate, and our Riding with the Brand rally was a celebration of the REALTOR® difference. More than two hundred members and guests joined us outside the REALTOR® building downtown for a day that started with Code of Ethics training and grew into a memorable afternoon of fun and comradery.
I hope the event left everyone with more than a mild sunburn – it’s a reminder that the REALTOR® brand isn’t packaged by NAR or painted on the side of a bus (though admittedly the bus was pretty cool): It’s the relationships built guiding customers through life-changing decisions, the confidence earned in expertise and commitment to professionalism.
We saw that commitment a few days later at the Rural Housing Summit in French Lick. After each panel discussion, REALTORS® were lined up and ready with specific and often probing questions about a diverse range of topics – the income eligibility thresholds for certain USDA mortgage loans, options for getting higher-speed broadband service to rural addresses, accessing elevation studies for homes that might lie in a floodplain and many more.
These Q&A sessions showed first-hand how REALTORS® live these issues on a daily basis, and their willingness to go the extra mile to make connections and get answers for their customers.
2) Your voice matters (and makes a difference).
Another recurring theme of the Rural Housing Summit was the power of REALTORS® to drive progress on important issues. Most notably, Representative Doug Miller credited REALTORS® for raising awareness of Indiana’s housing shortage and the need for solutions to make homeownership more affordable and accessible for Hoosiers.
We participated on the Housing Task Force co-chaired by Representative Miller and made its primary legislative vehicle (House Bill 1005) the centerpiece of our policy agenda in the General Assembly – and the support of more than 21,000 REALTORS® in every single county and district across the state was critical to pushing the proposal across the finish line and making historic state-level investments in housing development a reality.
But REALTORS® have to stay engaged. Now it’s time to push city and county officials, redevelopment commissions and other local policymakers to capitalize on new financing tools for residential infrastructure and prioritize housing projects.
It’s time to show up and speak up at the Community Broadband Visioning Sessions being held across the state (and urge local leaders to pursue ‘Broadband Ready Community’ status if they haven’t already) to attack the digital disparities that still impact so many rural areas.
And while Indiana REALTORS® are already partners in the state’s ‘Hoosier by Choice’ and ‘Back Home Again’ campaigns, it’s time to step up support for local and regional talent recruitment initiatives; REALTORS® are a committed grassroots salesforce for the communities they serve.
3) Housing development is economic development.
To that point, we heard loud and clear at the Housing Summit that housing is an economic development issue for Indiana. Mike Rutz of MakeMyMove noted during our final panel of the day in French Lick that people don’t pursue jobs across state and local borders the way they did twenty or thirty years ago – today, jobs and business investment follow people.
This makes housing critical infrastructure in a talent-driven economy: Communities can’t compete (and companies can’t hire) if their residents and recruits can’t find affordable, appealing places to live close to work and other daily necessities.
Vincent Ash of the Indiana Economic Development Corporation (IEDC) stressed that housing capacity comes up in every discussion with major employers being courted to locate, invest and employ in Indiana. With housing a formal priority in the second round of the billion-dollar READI program, Ash expects the state to step up strategic investments in residential projects.
4) We’re fortunate to count on so many pro-housing partners.
The IEDC, the Indiana Destination Development Corporation (with our own Bernice Helman on the board of directors) and the Office of Community and Rural Affairs (OCRA) were among the state agencies represented at the Rural Housing Summit. They’re all great partners in advancing community redevelopment and revitalization, expanding economic opportunity and promoting Indiana as a great place to live, work, and put down roots as a homeowner.
But the Indiana Housing and Community Development Authority deserves a special shout-out as the agency most directly involved in homeownership. IHCDA offers an array of programs targeted to low-and-moderate income homebuyers and homeowners, including lending and down payment assistance programs that are more important than ever as affordability and availability pressures have driven the average age of a first-time buyer to an all-time high while pushing the overall share of first-time home purchases to an all-time low.
IHCDA Executive Director Jake Sipe participated in a panel discussion on ‘attainable homeownership programs’ at the Rural Housing Summit; at one point, a fellow panelist noted that certain federal mortgage programs currently have processing and approval periods over a hundred days. Jake, on the other hand, volunteered that IHCDA processes all loan applications within 24-48 hours. It’s a well-worn cliché to say that government should move at the speed of business, but a public entity that actually delivers on that promise should be recognized.
(Lieutenant Governor Suzanne Crouch, a former REALTOR® who oversees IHCDA, OCRA and the IDDC, is also a strong champion of housing and homeownership and delivered the keynote presentation to kick off the Rural Housing Summit.)
We need all of our partners and collaborators in the public, private and non-profit sectors to move the needle on issues like Indiana’s housing shortage – because as homebuyers return to the real estate market, our inventory challenges aren’t going away.
5) Indiana’s housing market continues to recover ahead of the national curve.
In some parts of the country, continued turmoil in the housing sector is taking a toll on the real estate profession. I chatted with a reporter from Axios last week who was surprised to learn that our membership is steady – in fact, higher than May 2022.
Our market is outperforming the rest of the nation too. Sales remain 14% below 2022, but the year-over-year gap across the U.S. is well over 20%. Property values continue to rise, while national prices have retreated for three straight months. And trends seem to be pointing in the right direction as we head into summer – double-digit growth in new listings, pending and closed sales from April through May and a brisk pace (six days from listing to pending contract).
But we can’t be complacent, and that’s a final fitting takeaway: We have to seize every opportunity to communicate the REALTOR® brand, to invest in our members, to harness the power of advocacy and partnerships to rebuild residential supply to match demand, so we’re celebrating an even more hectic start to Homeownership Month next year.
Inside IAR 5/19/23
View Email
Back to the Future of Indiana’s Housing Market
It’s been a few weeks since the General Assembly adjourned, so we’ll start with a delayed victory lap for a successful legislative session (obligatory May racing reference). But as we’ll get to in the second half of this column, there’s hardly time to reflect on last month before being pushed ahead to consider what’s in store for our housing market in the next decade.
Looking back on a pro-housing budget session:
Indiana’s next biennial budget features historic investments in housing development, lawmakers passed homeowner tax relief and strengthened our constitutional tax caps with an expanded definition of homestead property. A few more highlights from the statehouse:
- The $44.5 billion two-year budget signed into law by Governor Holcomb includes $75 million for a new residential infrastructure loan fund proposed by the Indiana Housing Task Force and created through House Bill 1005 (the centerpiece of our legislative agenda).
- This revolving loan fund helps local governments offset the rising cost of new infrastructure associated with housing projects; HB1005 also provides new flexibility to repay these loans from a growing property tax base.
- The budget also includes $500 million for another round of READI grants for communities working together to attract new workers and economic opportunities – and includes housing as a priority.
- These appropriations make up the largest state-level investment in housing ever for Indiana.
- The legislature also passed $100+ million in targeted tax relief in response to rising property assessments and bills with bipartisan support – the tax package temporarily increases homestead deductions and decreases levy limits on total tax collections, while making cost-of-living adjustments to the 65+ deduction to help fixed-income homeowners.
- Residential taxpayers also got relief from stealth tax increases carried out by assessors using a narrow definition of structures included under Indiana’s 1% homestead cap: SB325 clarifies the meaning of ‘homestead dwelling’ and expands eligible property to include all decks, patios, gazebos and pools along with an additional building and yard structure.
The list of pro-housing wins goes on, including playing defense against attempts to circumvent Indiana’s property tax caps to put new burdens on homeowners through ‘special assessments.’ All in all, a very good year for current and future homeowners at the statehouse.
So when Indiana’s delegation traveled to Washington for the NAR Legislative Meetings, we were proud to report on our efforts to protect Hoosier taxpayers and advocate for state-level solutions to our ongoing housing shortage. The challenge of limited inventory was a recurring theme in DC, and a national concern as we head into the heart of homebuying season.
Falling Supply = Slowing Sales
April sales data provided a first-hand look at what happens when homebuyers return to the market faster than sellers.
Closed home sales slowed considerably for the month after a faster-than-expected first quarter of the year – sales surged 60% from January through March, while new listings lagged behind with 35% growth. The imbalance took a toll on total inventory, which averaged 8,275 active daily listings in April versus more than 12,500 in January.
With fewer options available, April’s 6,170 total sales fell 19% below 2022 after March had fully closed the year-over-year gap. At the same time, homes sold at a faster pace (eight days from listing to closing) and the median sale price rose to $245,000 – signs of healthy demand disrupted by supply challenges and elevated mortgage rates, as owners with mortgages locked into the 3% range hesitate before listing their homes and re-entering the market.
But is Indiana housing headed for a demographic cliff?
We’ve consistently focused on supply as the biggest hurdle to homeownership and a growing housing market, supported by straightforward calculations: The average inventory of homes listed for sale statewide has plummeted more than 60% since 2016; we’ve added roughly 80,000 new housing units but gained 110,000 new households in that timeframe.
And in a clear market signal of demand outpacing supply, Indiana is poised for a 76th consecutive month of year-over-year price appreciation if May trends hold up.
So the first edition of the IU Kelley Real Estate Outlook (from IU’s Center for Real Estate Studies and the Indiana Business Research Center) caught our attention with the headline, “Prepare for a Generational Housing Bubble.”
Co-authors Phil Powell and Matt Kinghorn see a coming exodus of Boomers from the housing market and the declining size of post-Millennial generations as a ‘one-two punch’ to future housing demand that could create a bubble of surplus housing if we overbuild today.
We value our collaborations with the IBRC and welcome challenges to conventional wisdom, but we also can’t afford to take our foot off the accelerator when it comes to the urgency of new housing development. So here’s our high-level take on the demographic argument (with a more detailed analysis to come).
We’re not inflating a bubble – we’re digging out of a crater:
First of all, the prospect of excessive homebuilding collides with recent realities. There has been an upturn in construction over the past two years, but activity is just two-thirds its mid-2000s level – we’ve never fully recovered from the Great Recession and have continued to add new households faster than new housing units.
In fact, looking at residential permitting activity on a per household basis we see housing development still lags near a thirty-year low despite recent improvements.
And the hurdles to new housing remain formidable: Residential construction costs have risen nearly 40% from pre-COVID levels (along with associated infrastructure) and the burden of restrictive local zoning policies continues to distort the market.
Powell and Kinghorn write that “demographic pressure on housing markets is at its peak.” But supply pressure is responsible for median home prices increasing nearly 50% over the past five years. Considering our current shortage, generational shifts could ease our current seller’s market – oversupply causing property values to deflate is a distant threat.
The demographic pipeline is stronger than it looks:
We also have a more optimistic perspective on these generational trends: Based on Indiana’s 2021 population breakdown, there are 431,000 Hoosiers aged 75+ likely to be exiting the housing market by 2035. At the same time, there are 942,000 potential early homebuyers (age 24-33) joining 914,000 more Hoosiers hitting the heart of the bell curve for first-time buyers (age 34-43).
Whether they become homeowners depends in part on today’s efforts to close the gap between supply and demand to improve affordability and bring price appreciation closer to income growth for the typical Indiana household.
Growing the housing market:
We can also broaden our pool of potential homebuyers through continued positive migration and by building a more inclusive housing market.
As you’ve read before (it’s worth repeating), Indiana gained more than 31,000 Hoosiers through net migration over the past five years while Ohio, Illinois and Michigan shed hundreds of thousands of residents. This inflow helped boost housing demand.
But this interstate momentum wasn’t preordained; in fourteen of the first seventeen years after 2000, Indiana lost more residents than we attracted. Investments in quality of life, maintaining an affordable cost of living and competitive business climate, enacting welcoming policies and showcasing the best of Indiana all make a difference in recruiting more ‘Hoosiers by choice.’
Making real progress in closing racial homeownership gaps can also help us defy demographic projections while living up to our commitment to fair housing and extending the benefits of homeownership to more Hoosiers.
In 2021, Indiana’s homeownership rate was 76% for white households versus just 38% for Black households. If Indiana’s homeownership rate was even 50% for Black households – a worthy aspiration – our state would create nearly 30,000 more homeowner households.
Rebuilding (and rethinking) our housing stock:
Simply comparing population projections to housing unit totals also ignores the effects of time and changing consumer preferences on our built environment. Indiana’s housing stock is older than U.S. averages – 44.5% of our housing units were built before 1970 (versus 38% nationally). In Indiana’s rural communities, one of every four homes were built before the end of World War II (learn more about these issues at our upcoming Rural Housing Summit).
Indiana’s housing stock is also more concentrated in single-unit detached homes (73% compared to 62% across the U.S.); studies suggest that attached housing and townhomes (with walkable neighborhood attributes) will drive a growing share of the market going forward. So some level of current residential construction will involve replacing or adapting current stock – not just adding net units.
Demography and destiny:
I’m not making these arguments to deny demographic realities, but to make the point that projections change as circumstances evolve: The choices we make today – our business practices and public policy priorities, support for economic and community development and a host of other factors – influence future housing demand across Indiana.
And today, supply is the fundamental barrier to more affordable and achievable homeownership. So when I look ahead to 2030, my biggest fear isn’t too many houses for sale – it’s looking back and realizing we didn’t capitalize on our statehouse victories, and missed opportunities to rebuild residential inventory and revitalize our housing market.
Inside IAR 4/13/23
View Email
The Case for Pro-Growth Housing Policy
March continued a warm-up for Indiana’s housing market – statewide home sales rebounded to 2022 levels despite mortgage rates more than two percent higher than a year ago. Pending sales also closed to within 11% of last March, finishing on a strong week-by-week upturn that bodes well for April closings.
Speaking of April, it’s also property tax season for homeowners across Indiana: This year’s tax bills are hitting mailboxes, and 2022 assessments previewing next year’s bills aren’t far behind.
As you know, Indiana property taxes are paid in arrears, and assessments finalized in January effectively capture the previous year’s trends. This means 2023 bills are based on the red-hot market of 2021 and the latest assessments reflect last year’s slowing-but-steady price appreciation.
Hoosier homeowners gained tremendous wealth over the past two years ($50,000 in equity on a median-priced home through 2021 and 2022). Of course, this doesn’t mean they welcome the increased bills that predictably follow.
Growth is the only real solution: Growing our housing supply to make homeownership a reality for more Hoosiers while easing the competitive buying conditions that drive up prices, property assessments and tax bills.
In short, Indiana needs pro-growth housing policy. And that’s why it’s frustrating to hear anti-growth arguments about residential development (and the tools to promote it).
Pushing back on fiscal fallacies:
In communities across Indiana, available housing lags behind the demand created by new residents, employers and commercial investment. In a 2020 survey of local elected officials conducted by the Indiana Advisory Commission on Intergovernmental Relations (IACIR), “quality and affordable housing” was identified as a top concern by 74% of respondents.
Three years later, statewide available inventory has dropped another 30% (measured by monthly average listings). Indiana’s level of residential building permits-per-household is languishing near a thirty-year low. In short, our housing shortage is getting worse.
But when it comes to specific incentives and financing tools meant to encourage housing projects, some local officials hesitate – or offer objections rooted in a static view of Indiana’s property tax structure.
A quick refresher course: After Indiana’s shift to a market-based system led to large and often-unpredictable increases as assessments caught up to reality in the mid-2000s, REALTORS® championed sweeping reforms headlined by constitutional property tax caps.
Homestead property tax bills were capped to one percent of assessed value with an increased homestead deduction (now set at $48,000) adding more relief. Pre-existing controls on total tax collections (the ‘maximum levy’) limits the overall growth of property taxes to statewide personal income growth on a county-by-county basis.
Tax caps have saved taxpayers more than $7.5 billion since 2011 in ‘circuit breaker credits’ (uncollected revenues that stay with homeowners when overlapping tax rates imposed by cities and counties, school districts and townships push bills over the 1% cap).
The caps have fueled a short-sighted view that new housing only adds to budget pressures on local governments – cities, counties and school districts. According to this reasoning, a new home valued at less than $350,000 (the amount varies by community) creates more cost than revenue under the 1% homestead cap – road maintenance, school buildings and buses, public safety and other services supported by property taxes.
It’s an argument that embodies the adage “missing the forest for the trees.”
Broaden the tax base, grow the economy:
Tallying up the difference between individual tax bills and incremental budget impacts ignores the bigger picture – growing communities are thriving communities. Companies want to locate, expand and invest close to their customers and employees. Proximity to workforce is now a top-ranked factor in economic development decisions, as employers prioritize talent over tax breaks, highway access and other traditional barometers of business-friendliness.
So encouraging “workforce housing” is also an incentive for economic growth, paying off in a broader commercial and industrial tax base (that, by the way, generates property tax revenue under a higher 3% cap).
Even without considering the undeniable connection between residential development and economic development, the arguments against housing ignore current budget realities. I opened this message by noting that homestead tax bills have already risen along with property values – and this isn’t just a one or two year trend.
According to a pair of studies released by the Association of Indiana Counties, homeowner tax bills have been rising more than 7.5% a year since 2017 (as positive population trends boosted demand for housing and prices followed). Bills for industrial properties have grown less than 5% a year, and commercial property taxes only saw a 2.5% annual increase. Farmland bills were essentially flat.
In terms of total property tax liability, homeowners paid 43% of all property tax revenue collected in 2017 – today, they shoulder half the total burden. That’s a shift of nearly $1.5 billion into the bills paid by homeowners.
These calculations don’t even take into account the growth of local income taxes as a share of revenues for counties and municipalities. These revenues are based on the county of residence, so they rely on housing as well. The housing sector isn’t a strain on local budgets – housing is the base that local budgets are built on.
When push comes to shove:
It’s not that these arguments are groundbreaking or that communities don’t aspire to growth. The evidence is in the first round of READI grants from the state: When local officials, business and civic leaders sit at the same table to think about the future of their regions, housing rises to the top of their shared priority lists – 40% of all projects funded in ‘READI 1.0’ were residential.
The controversy emerges when local financing mechanisms are on the table, especially tax increment financing (TIF) districts that capture the growth of property tax revenue attributable to a specific project to reinvest in that project. We recently ran into some of this pushback when our key legislative priority, House Bill 1005, was amended to relax limits on residential TIF programs.
As you know by now (unless you’ve ignored this year’s columns altogether), HB1005 creates a Residential Housing Infrastructure Assistance Program and Revolving Fund seeded with $75 million, leveraging the borrowing power of the state to provide low-cost financing to local governments for infrastructure costs associated with new housing projects.
The current limits on residential TIFs are too restrictive, locking communities into a losing battle of housing development versus household formation. Adding TIF flexibility to HB1005 allows local units a mechanism to repay loans issued through the new loan fund, or the flexibility to pursue projects on their own.
TIF is often criticized as an overused tool that costs local governments revenue, applied to projects that would have happened anyway. But Indiana has a deficit of 30,000+ housing units – 30,000 arguments that we need a bigger toolbox for rebuilding residential inventory.
Funding full classrooms:
Some of the most pointed arguments against TIFs come from school corporations, protesting any further erosion of their property tax base. But I’d argue that residential TIFs – evaluated on their own merits – have the greatest potential to help local schools.
One major financial strain on many school districts is falling or stagnant enrollment and the cost of maintaining half-empty buildings, fueling too many buses and funding programs to serve fewer students. New housing means new students, and the $8,000-per-pupil in state formula funding they bring with them. In a previous chapter of my career, I worked alongside urban school officials as they made tough decisions to right-size operations and drive more funding to the classroom – so I’m confident in saying that enrollment gains trump revenue loss as a fiscal consideration to a strategically-drawn TIF.
A state of growth:
I’ve used the saying many times in making the connection between residential development and economic development – “Houses are where jobs go to sleep at night.” I’ll add that houses also shelter the largest slice of the local property tax base. They welcome students home from local schools, bringing income and sales tax revenues back to the communities that pay into the state’s coffers. Houses are where our workforce rests, where Hoosiers and Hoosiers-by-choice put down roots, pay taxes and reinvest their earnings in the local economy.
We’re confident that pro-growth arguments will prevail, sending HB1005 to Governor Holcomb’s desk and boosting our capacity to overcome our state’s housing shortage.
Inside IAR 3/15/23
View Email
March Madness
This week brought an icy blast of winter back to Indiana – but at least our housing market has been thawing out over the past month-and-a-half after ending 2022 in the deep freeze. February packed a surprising level of activity into twenty-eight days, starting with statewide home sales jumping 17% from January to hit 4,895 – just 15% below February 2022 (the last month homebuyers were able to take advantage of sub-4% mortgage rates).
This continued to close the year-over-year gap that had hit 30% in December before receding to 26% in January. We can’t read too much into two months of stabilizing sales but it’s encouraging that homebuyers are venturing back into the market (even as mortgage rates crept higher).
But while the market for buyers in spring 2023 is more balanced than 2022 or 2021, supply is still tight – February’s average daily inventory covered less than two months of current sales demand (based on a twelve-month average). We’ve been below three months of available inventory since 2018, while 5-6 months is considered a truly balanced market.
It’s the Indiana real estate version of March Madness – preparing for another homebuying season with fewer homes for sale than the year before. For eleven of the past thirteen years, that’s been the frustrating fact of life for REALTORS® and the growing number of Hoosiers unable to find or afford housing convenient to their jobs, schools and communities of choice.
In the last Inside IAR, we referenced some recent media stories and commentary questioning the severity of Indiana’s housing shortage. It’s worth revisiting the topic and pushing back harder on a few misconceptions, because we have a unique opportunity to champion meaningful solutions down the homestretch of the legislative session.
This Inside IAR includes a detailed update on our agenda in the General Assembly, including pro-inventory proposals like House Bill 1005 and how lawmakers are grappling with the consequences of rising home values showing up in property assessments and tax bills. Because this year’s property tax hikes reflect the record-setting market of 2021, they were predictable by REALTORS® with perspective on supply and demand over time.
REALTORS® live with the numbers: Data collected from Indiana’s MLS marketplaces tell the story. In 2011, more than 45,000 homes were listed for sale in a given month; by 2018, monthly average listings had dropped to 19,000. In 2021, monthly inventory was running neck-and-neck with sales at just over 8,000 in a hyper-competitive seller’s market. Monthly inventory eased back above 10,000 in 2022 as rising interest rates cooled demand and sales dipped to about 7,500 a month.
Hoosiers are being priced out of homeownership: Indiana home values have risen at about 75% of the U.S. average since the 1990s, according to the federal Housing Price Index. But basic economics tells us that scarcity drives up prices – and by that measure, we have clear evidence of an undersupplied market.
The past five years flipped the trend of the previous two decades, with Indiana housing prices surging ahead of the nation by nearly 6%. This coincided with more than 30,000 new residents moving into the state from 2018-2022 as we wrapped up a decade of Midwest-leading population growth.
At the same time, annual price appreciation jumped from just over 4% a year from 2010 through 2017 to nearly 10% from 2018 through 2022. In real terms, Indiana’s median home price has grown from roughly $155,000 in 2017 to $230,000 today, obviously outpacing income growth over the same period.
Pressure for legislative action: Housing is a basic necessity, a quality of life priority and a growing factor in economic development decisions. Indiana has built a pro-homeowner policy climate, but a shrinking market and lack of affordable ‘starter homes’ puts the state’s homeownership rate at risk for future generations.
For all these reasons, the General Assembly is rightfully focused on ways to address Indiana’s housing shortage. Lawmakers are also sensitive to rising tax bills, and adding inventory is the best way to keep home prices and property assessments under control over the long term.
As I described back in January, HB1005 grew out of Indiana’s Housing Task Force as a way to promote residential development by tackling local infrastructure costs (which have grown even faster than consumer prices since 2020). HB1005 creates a state-backed revolving loan fund to help pave the way (pun intended) for new housing with low-cost financing for the streets and sidewalks, utility connections and water systems associated with these projects.
The bill doesn’t subsidize private development, but helps local governments prioritize housing by easing the shared burden of public infrastructure.
The bill passed the Indiana House with broad bipartisan support and awaits a hearing in the Senate Appropriations Committee, as you’ll read in our legislative update. But debates over spending priorities get heated in the homestretch of a budget-writing year, and even common-sense measures can get sidetracked or shortchanged – one reason we continue to reiterate the need for new housing every chance we get.
Indiana should invest in a rural rebound: One critique of HB1005 is how the bill specifically divides available resources between larger cities and rural areas of the state – why target housing funds to places that have struggled with long-term population losses?
Indiana’s 21,000 REALTORS® support Hoosiers on their homeownership journey from our largest cities to the rural communities that more than a million of our neighbors call home. Housing supply is a statewide challenge, and rural Indiana has seen residential inventory drop 20% since 2018 while adding new housing units at less than half the statewide pace.
But small towns are thinking bigger about the future: The majority of Indiana’s rural counties have improved net migration since 2019, reflecting a national trend of homebuyers reevaluating the appeal of life beyond metropolitan America. NAR reports that nearly half (48%) of all homes purchased in 2022 were in small towns and rural areas – an all-time high in homebuying share.
The rural economy is also benefiting from new manufacturing investments, agricultural and energy innovation. Housing has to keep up with these demographic and economic opportunities, and homeownership is vital to reinvesting in and revitalizing rural Indiana. We don’t have a position on specific funding formulas in HB1005, but we do support rural housing development – it’s why IAR is organizing the first-ever Indiana Rural Housing Summit on June 5-6 at the beautiful French Lick Resort.
We hope to see you in French Lick for a meaningful discussion of housing in areas of Indiana that are too-often overlooked or left behind – but also to celebrate pro-housing wins at the Statehouse and a housing market that continues to outperform our expectations.
Inside IAR 3/1/23
View email
Rebuilding a more balanced – and inclusive – housing market
Making sense of the current real estate climate is no easy task, even with the luxury of the latest numbers and expert insights on their meaning. Sales through the first two months of 2023 are on track to finish about 25% below last January and February, leveling off after closing out 2022 with a year-over-year gap of 29% for November and December.
This modest sign of stability doesn’t mean we’re on a glide path towards a recovery. Mortgage rates have ticked up as the Fed has signaled renewed concern over persistent core inflation (even though the Consumer Price Index has fallen for seven straight months).
Recent weeks of pending sales data seem to predict a continued sales plateau into March, slower than the usual upturn into spring. We’re confident that our market is ready to rebound, but the timeline is less predictable.
A more balanced market brings more opportunities for homebuyers. Inventory is still historically tight, but monthly listings have been above 12,000 for six straight months (the highest levels since the first half of 2020), while annualized price growth is below 4% from October through February. As buyers gain bargaining power, Indiana’s median sale price as a percentage of original list price has dropped to 94% – approaching a ‘normal’ pre-2020 ratio.
Some buyers face higher hurdles to homeownership
But not all homebuyers are able to capitalize on the cooling demand. As we come to the end of Black History Month, we have to recognize the legacy of housing discrimination still impacts us today – in the 55 years since the passage of the federal Fair Housing Act, the gap between Black and white homeownership rates have barely budged, at more than thirty percent nationally.
Here in Indiana, the divide is even wider: Nearly 74% of white households own their own home, compared to just 37% of Black households. As champions of homeownership and competitive, transparent real estate markets, these numbers should be on our minds twelve months a year.
Decades of discrimination and missed opportunities to build equity and accumulate the generational wealth that comes with owning a home has created disparities that are just as obvious in a balanced market.
A balanced market doesn’t bridge racial divides
Inflation has taken a toll on all Hoosiers, and rising levels of consumer debt show the struggles of Americans borrowing just to make ends meet. Saving a down payment becomes an even bigger challenge for first-time homebuyers who can’t leverage the sale of a previous home to help purchase a new property.
This means that existing gaps in homeownership become a self-perpetuating force: While nearly 40% of white buyers used proceeds from their last home to make their next purchase, just 20% of Black homebuyers had the same opportunity. In contrast, Black homebuyers were more than twice as likely to tap into a 401(K) or other pension fund for a down payment, risking tax penalties and strain on their future finances.
Today’s combination of higher inventory, slowing price appreciation and elevated mortgage rates also helps buyers who are able to take advantage of the old saying, “Date the rate, marry the house” – seizing the opportunity to find bargains in a less competitive market with the intention of refinancing when rates begin to drop.
With lower average earnings and assets, however, Black homebuyers don’t have the same capacity to accept temporarily higher monthly payments as they wait for more favorable lending conditions. And with current homeowners more than twice as likely to have a credit score over 700 than the average renter, securing a competitive rate and timing the market to refinance is a much tougher task for first-time buyers trying to make the transition.
Income and affordability
These issues point towards the most fundamental financial challenge facing Black homebuyers – the uneven growth of household income versus housing prices. In Indiana, the difference in median household income by race is even larger than in homeownership rates, roughly 40% between Black and white families. As home values rise, the path to homeownership becomes narrower for Hoosiers who already face a litany of systemic and explicit barriers.
Look at it this way: Since 2020, the number of homes listed for sale at $200,000 or less has dropped by 30% (while total listings have declined by about 2%). In 2019, the median sale price of an Indiana home was about $170,000. Three years later, home values have risen nearly 40% and homes sold for less than $170,000 represent about 25% of the total market.
Over the same three years, state per capita income has grown about 20%, and many first-time homebuyers have been squeezed out as buying power falls further behind and affordable ‘starter homes’ become harder and harder to find.
Inventory and a more inclusive housing market
It would be naïve – even offensive – to suggest that market failures are solely responsible for racial gaps in Indiana’s homeownership rate. Discriminatory practices and overt prejudices still exist, often difficult to identify and uproot even under today’s legal protections.
But increasing residential inventory is still the only sustainable way to ease price pressures and make homeownership a realistic possibility for more Hoosiers. We’re making progress in the General Assembly as the recommendations of the Housing Task Force continue to enjoy broad bipartisan consensus.
We’re also supporting stronger incentives for our partners at Habitat for Humanity as they work on the front lines of housing affordability and continue a promising dialogue with the Indiana Housing and Community Development Authority on expanding the reach of their homeownership support programs.
If the history of homeownership trends since the passage of the Fair Housing Act teaches us anything, it’s that disparities can’t be resolved with the stroke of a pen. We also have to deal with the forces of supply and demand that shape our real estate market.
REALTORS® also have a higher responsibility to do business according to the Code of Ethics, to take advantage of fair housing resources and training offered through our associations, to acknowledge our own biases and work to address them in our businesses and daily routines.
And finally, we should remember that the future of our industry depends on today’s first-time buyers, of all backgrounds and walks of life. REALTORS® have a unique opportunity to rebuild their confidence in the dream of homeownership as trusted professionals and expert advisors in a changing market.
Inside IAR 2/1/23
View email
A strong start to 2023 at the Statehouse and beyond
2023 has started on a positive note, with a legal win, legislative momentum and a steady improvement in lending conditions – let’s hope the first few weeks of the year are a precursor of things to come.
Mortgage rates have dropped four straight weeks in January on encouraging inflation reports. From bank terms to the federal bench, a DC circuit court judge ordered the U.S. Department of Justice to honor an agreement with NAR on MLS participation and compensation policies – good news for competitive real estate marketplaces with transparency around commissions.
And across the street from the REALTOR® building, housing is a hot topic in the Indiana General Assembly: We’re excited about the potential of several proposals aimed at encouraging homeownership and residential development to address long-term inventory challenges.
REAL Support on Housing Issues:
We’re heading into this budget-writing session with an ambitious set of legislative priorities, published in detail after a process of member input, discussion and approval by our board; I hope you’ll look through our 2023 agenda (Rebuild & Renew) if you haven’t already.
We’re hardly the only organized interest pushing our platform with lawmakers – especially when it comes to spending commitments in the next two-year state budget. But we do have a not-so-secret weapon behind our advocacy efforts: 21,000+ members working in all 92 counties as some of the most active citizens and hard-working entrepreneurs passionate about the future of their communities.
Each session, we mobilize our most engaged REALTOR® advocates region-by-region at the Statehouse. This week marks our first two Delegation Days, hosting Central Indiana (the MIBOR REALTOR® Association) on Monday and Northwest Indiana on Tuesday. Members met face-to-face with their legislators on behalf of our pro-housing agenda – an agenda focused first on residential inventory keeping up with population and economic development trends.
Defining the Challenge: Inventory, Inventory, Inventory
I’ve written again and again (and again) that housing supply is Indiana’s biggest barrier to homeownership – but I’ll repeat it anyway: As demand rebounds and buyers return to the market, limited inventory continues to threaten the recovery of our real estate market and our ability to attract people and employers to the state.
MLS data shows that our average monthly inventory of homes for sale has plummeted 80% since 2011 and has been cut in half since 2017. Especially over the past five years of strong migration and business investment, this has meant rising prices and intense competition.
REALTORS® don’t need the numbers to confirm their experiences with frustrated homebuyers who can’t find or afford homes that that meet their household needs and lifestyle preferences convenient to work.
For broader context: Indiana has added 400,000 private sector jobs and 300,000 residents (living in more than 160,000 new households) since 2010. But we’ve brought less than 150,000 new housing units to market in that time – leaving a statewide gap of at least 30,000 units that’s especially troublesome around growing employment centers.
The General Assembly created a Housing Task Force (including REALTOR® representation) in 2022 to study ways to ease these inventory pressures and encourage new residential development. Traditionally, Indiana hasn’t invested significant state funding to support new housing, but the Task Force recognized the need to rethink this approach – and we agree.
Making the Case for Housing Investments:
Crafting a state budget is an exercise in competing demands for finite resources, and this session is no different – lawmakers are torn between a forecast that adds more than $1.5 billion to current revenues over the next budget cycle, inflation’s impact on state spending (including the salaries of teachers and other public employees) and the impulse to plan cautiously against the threat of economic downturn.
To help make the case for new programs dedicated to housing, we turned to Fourth Economy Consulting, a national economic development firm, to take a deeper dive into the funding landscape for housing and homeowner support in Indiana.
The Fourth Economy report stresses that today’s shortage of workforce-accessible housing could hinder the state’s future economic and workforce development efforts. It goes on to track current spending on housing initiatives across all sources and state agencies to assess where new investments could make a difference.
The analysis finds that while Indiana administered nearly $200 million in federal housing funds in 2021, these dollars come with little flexibility to support new residential development, particularly workforce housing projects. Strong demand for housing-related proposals in the first round of READI grants had already offered a wake-up call on this state-level funding gap.
One role for state government is addressing the rising costs of public infrastructure associated with new residential growth; the average costs of new roads, sidewalks and bridges, water systems and material inputs have spiked more than 40% since 2020.
These costs discourage development and strain the budgets of local governments. We strongly support HB1005 authored by Representative Doug Miller (also a co-chair of the Housing Task Force) that creates a new state-backed loan financing program to ease the fiscal impact of new housing. The bill passed unanimously through its first committee stop and is scheduled for a hearing in the House Ways & Means Committee later this week.
Along with HB1005, IAR’s Rebuild and Renew agenda embraces the other recommendations of the General Assembly’s Housing Task Force and endorses a fully-funded renewal of the READI program. We’re also focused on protecting fair and accurate property assessments and defending Hoosiers from new taxes on real estate transactions and other essential services.
Team Wins:
These priorities are powered by our members – including a great team at the top. This week, Lynn Wheeler was formally installed as 2023 IAR President, taking the gavel (and a good-natured roasting) from Andy Rudolph as he closed his presidential tenure with his customary grace and humor.
Along with President-Elect Jennifer Parham, Vice-Presidents Kim Ward and Aaron Luttrull and the rest of our Board of Directors, Lynn and Andy exemplify the dedication of our leadership as they take time from their own businesses and other commitments to serve their state association and profession.
2023 is off to a strong start. Being surrounded by REALTOR® leaders, volunteers and advocacy champions this week only adds to my optimism about continued success at the Statehouse and beyond as the real estate market rebuilds from the challenges of the past year.
Inside IAR 12/22/22
View email
My prediction: No one remembers today’s predictions by next December
It’s the time of year when experts of all stripes are making bold (or not-so-bold) predictions for 2023, including the economic front: Have we truly turned the corner on consumer inflation? What are the odds that a recession is our prize for winning the battle against runaway prices? And when will the housing sector rebound from the turmoil of the past twelve months?
These projections can be addictive; who wouldn’t want the competitive advantage of a crystal ball into the future of your market? But they’re often off-base – let’s revisit a few assumptions in 2022:
- Leading authorities on U.S. home loan trends foresaw mortgage rates averaging 3.6% this year – not spiking to nearly 5.5% for the 52-week average.
- The Federal Reserve itself believed it would only raise rates three times in 2022, not the unprecedented seven consecutive hikes that helped crush housing demand for much of the year.
- Most economists believed that the U.S. economy would grow at a healthy 3.5%+ pace this year, optimism that was dashed after an unexpected 1.6% contraction for the first three months of 2022.
- Despite the tougher economic climate, monthly employment reports routinely surprised observers by outperforming expectations even as the Fed tightened its monetary grip on the economy.
- And it would have been tough to anticipate mortgage rates actually falling five straight weeks after the Fed’s final three-quarter percent rate increase of the year in November – the markets were so eager to embrace positive news on inflation that policy action barely registered with lenders.
This doesn’t mean we’re flying blind into the New Year. But it does offer some food for thought on how to interpret the housing forecasts for 2023.
Markets are made by people:
Looking at macro-level assertions about the future of our economy, it’s easy to lose sight of the human beings behind the numbers.
Roughly 70% of our national GDP is driven by consumer spending, for example – billions of buying, saving and budgeting choices made by hundreds of millions of Americans. Human behavior isn’t always rational and is often unpredictable, so any attempt to model it will always be imperfect. (For example, growing credit card debt instead of belt-tightening in response to inflation, despite rising interest rates.)
The same goes for real estate. Who would have surmised that the COVID quarantine would create a mass rethinking of our housing preferences, colliding with historically low interest rates and trends like remote work to create the intensely competitive seller’s market of 2020-2021?
Even putting aside truly unpredictable events like a global pandemic, national real estate forecasts still have to weave together economics, demographics, consumer sentiment and mass psychology into an analysis covering 125 million households across the country (and estimating the millions of properties that will change hands among them).
They also tend to highlight the most mercurial markets that anticipate dramatic swings in sales and prices – communities along the coasts and across the Sunbelt that don’t have much in common with Fort Wayne or Terre Haute. We often have to push back on national stories that simply don’t reflect our reality.
What about our Hoosier homebuyers and sellers?
That’s the bigger issue with national narratives about the housing sector: Macro-trends definitely matter – we’ve seen first-hand how sensitive housing demand is to movement in mortgage rates. But each housing market is unique…to paraphrase Tip O’Neill’s famous political adage, “All real estate is local” (even if we aren’t immune from national dynamics).
Let’s look at some of the forecasts from NAR – based on the best data and expertise closest to the pulse of the industry – and how they may differ from what we experience here in Indiana.
Existing U.S. home sales will reach 5.13 million in 2022, 16% below 2021.
Using estimates of December sales, NAR estimates that 2022 will finish about 16% below 2021. But Indiana’s housing market has outpaced the U.S.: From the beginning of June (when the impacts of rising mortgage rates collided with the busiest seasonal stretch of real estate activity) through November, sales across Indiana dropped 12% below 2021…nationally, sales plummeted more than 25% over the same six months.
It looks like statewide home sales for 2022 will hit 88,000, a 12% decrease versus the record-setting pace of 2021 – but still ahead of the national curve.
In 2023, NAR expects existing home sales to drop another 7%; will Indiana outperform this trend again?
Indiana continues to lead the Midwest in overall population growth and the net migration of “Hoosiers by choice” moving into the state. The team that crafts the projections behind Indiana’s state revenue forecast predict that our economy will slow next year, tracking closely with the U.S. – but Indiana is also marking a sixth consecutive record-breaking year for economic development, attracting more than $22 billion in new business investment to the state. As these projects become reality, they’ll create need for housing as well.
Demand for housing across Indiana has been strong and seems ready to rebound once the national climate and lending conditions improve. If we’re starting from a more positive trajectory despite the challenges of 2022, there’s reason for a more optimistic outlook continuing into the year to come.
Median home prices are anticipated to increase just 0.3% across the U.S.
The NAR forecast sees sales prices essentially flatlining (dropping as much as 15% in overheated markets like San Francisco). In Indiana, homebuyers should benefit from slowing price appreciation as well…but homeowners and sellers shouldn’t worry about the value of their largest asset, either.
Home prices have stabilized at roughly 12% above 2021 in Indiana, ahead of a 9.6% level nationally. Even as demand has cooled and homes have stayed on the market longer, Indiana’s housing inventory has stayed historically tight by pre-2020 standards, and sellers are still receiving 99% of their original listing price on average this year.
As rates drop and more buyers venture back into the market, supply and demand will still favor sellers – and rising home values – across much of Indiana.
New Year, Same You:
All the national forecasts (and even our state-level predictions) about 2023 are interesting and often yield valuable insights. But Indiana REALTORS® are in a better position when it comes to business reality – you’re the most credible experts on your local markets, armed with the most accurate and up-to-date information. (Working with our MLS partners and strengthening our data analytics team to supply you with the best market intelligence continues to be a top priority for IAR.)
So while forecasts are overtaken by unexpected events and annual predictions are usually forgotten before we abandon our New Year’s resolutions, REALTORS® are able to serve up the facts, explain the changing trends and guide customers through uncertain times. And when it comes to the life-changing decision to buy or sell a home, expertise and experience equal confidence.
With that, I hope you’re able to unplug and enjoy some well-deserved time with friends and family – on behalf of your IAR team, happy holidays and we’ll see you in 2023!
Inside IAR: 11/22/2022
View email
Riding Out the Storm
From November 10-14, more than ten thousand REALTORS® and industry professionals gathered in Orlando for NAR NXT and an agenda packed with learning, leadership development, networking opportunities and association governance. As a second-year NXT veteran, I thought I knew what to expect from the five-day convention – but Hurricane Nicole had other plans.
Nicole surged out of the Caribbean to make a rare November landfall as a Category 1 hurricane. Travel plans were scrambled, but disruptions to attendees were relatively minor – kudos to NAR’s organizers and Orlando’s hospitality industry – and Indiana’s delegation returned with new insights, ideas and enthusiasm for 2023.
I’d never equate the turmoil in our housing markets with the destructive power unleashed by Hurricane Nicole.
But the havoc these storms create are followed by stories of resilience, rebuilding and recovery that are inspirational: They’re reminders of our own capacity to overcome external forces that seem overwhelming – like the headwinds blowing against the housing sector through much of 2022.
Responding to a new reality:
Inflation has seemed like a force of nature battering our economy, chipping away at buying power and savings potential. And unless any of you have Jerome Powell on speed-dial, we can’t predict how long the Federal Reserve’s anti-inflation policies will keep mortgage rates elevated – they’ve risen from less than 4% to the 7% threshold in eight months.
REALTORS® have obviously felt the impact, with year-to-date home sales (statewide) dropping 8% below the first ten months of a record-setting 2021.
Our markets have been relatively steady: Indiana home sales fell less than 10% versus 2021 in the third quarter (July through September), while NAR reported a 20%+ drop-off nationally. Last month’s home sales declined 23% from October ’21, while sales across the rest of the U.S. plummeted nearly 30%.
But even if Hoosiers are facing storms instead of monsoons, our members are still grappling with difficult new realities in their businesses – and most are adapting with effort and expertise.
Activity and achievement:
Legendary coach John Wooden used to caution his players not to “mistake activity for achievement.” But in talking to REALTORS®, I’m hearing that one feeds the other: Brokers are making more calls, shifting marketing efforts into overdrive and working overtime to negotiate successful deals for customers.
There’s no denying the market is cooling, but REALTORS® are rising to the challenge by proving their value.
Leaving a lasting impression:
We heard an alarming statistic during one of the NXT sessions – according to a recent NAR-sponsored survey, 70% of consumers couldn’t remember the name of their REALTOR® a year after the transaction. Not exactly a compelling recipe for repeat business and referrals.
But a tougher real estate climate creates opportunities to leave a lasting impression. Buyers may lean on their REALTOR® as a de facto financial advisor as they contemplate the effects of rising mortgage rates and prices versus their household budget and the longer-term financial benefits of homeownership. For sellers, the power of relationships and aggressive marketing is elevated with fewer buyers competing for listings and more inventory available.
Economic uncertainty and a changing market make customers even more cautious about the life-changing decision to buy or sell a home, and eager for professional representation to protect their interests – REALTORS® already do business with higher standards to match these heightened expectations.
Investing in the future.
Economic and monetary trends aren’t the only elemental forces shaping our business climate. As a regulated industry, politics has an undeniable influence on real estate. Our advocacy effort is focused on protecting the integrity of the profession and the REALTOR® bottom line. We’re front line defenders of private property rights, accurate property assessments and the reforms that have delivered billions of dollars in tax relief to homeowners over more than a decade.
Looking ahead, we’re pushing for policies that ramp up residential development on the local, state and federal levels, anticipating a return to healthy demand and limited supply – especially here in Indiana, where falling inventory has forced many Hoosiers out of the housing market.
That’s why we lobbied for the creation of the Indiana Housing Task Force focused on inventory issues, and a seat at the table for REALTORS®. The Task Force has released its recommendations, framing our agenda for the 2023 session of the Indiana General Assembly.
But these priorities don’t succeed if we retreat from political advocacy. That’s why I’m so proud that we’ve met and surpassed our 2022 RPAC goal set by NAR, and are close to hitting our “reach goal” of $1 million. Despite all the challenges in the market, 2022 is a record-setting year for RPAC receipts. Thanks to broad member support and aggressive local fundraising, we vigorously supported our state and federal housing champions in the mid-term elections and are well-positioned for next year’s local campaigns.
Brighter days ahead?
The good news on RPAC is matched by optimistic signals from the market. A better-than-expected inflation report from October has caused mortgage rates to fall nearly 60 basis points over the past two weeks – that’s $80 a month on a 30-year, $200,000 loan. More importantly, signs of easing inflation could give the Federal Reserve the nudge it needs to slow the pace of interest rate increases starting in December.
The horizon isn’t clear yet. Many economists still believe the U.S. is headed towards a mild recession, and it’s far from certain the Fed will loosen its grip on consumer demand without more definitive proof that inflation is falling faster towards its 3% target. But there’s certainly reason for hope.
You’ve probably heard the saying, “You can’t control your circumstances, but you can choose your response” – REALTORS® have responded to a stormy 2022 by investing in their businesses, stepping up their contributions to a pro-growth public policy agenda, and continuing their commitment to the customers who need their services and support more than ever. That makes me believe the forecast for real estate is bright for 2023 and beyond.
Inside IAR: 10/13/2022
View email
What’s scary – and what’s not – about Indiana real estate
It’s October, but not everything is pumpkin spice lattes and autumn hayrides around Indiana real estate…some of the recent numbers feel more Halloween-themed: September’s existing home sales were down 13% versus 2021 as mortgage rates surged above 6% for most of the month (coincidentally, year-to-date sales have also fallen nearly 6% below the record-setting pace of 2021).
The Federal Reserve’s efforts to conjure a cure to inflation have haunted the housing market for much of this year. Rate increases have added hundreds of dollars to monthly loan payments for the average homebuyer since early 2022, scaring many to the sidelines, and a third consecutive three-quarter percent hike in the Fed rate hit borrowing costs even before it was officially announced in late September.
But the current dip in home sales isn’t likely to turn into a long-running horror franchise. As Indiana continues to add new residents and households, gain employment and grow personal income, residential demand will recover as inflation and economic uncertainties are laid to rest.
In a year that’s served up more tricks than treats from the national economy, what’s truly scary – and what’s not – about Indiana’s residential outlook?
Inventory: The Michael Myers of the Housing Market
Inventory is like the Michael Myers of Indiana’s real estate sector…no matter what you throw at it, it just keeps coming – slashing housing options and opportunities to enter the market.
Inventory numbers have been skewed this year by cooling demand, leaving more homes available for sale as mortgage rates sent many buyers scrambling to the sidelines. But like the Halloween boogeyman, we didn’t expect supply-side concerns to stay buried for long.
And indeed, new listings have dropped faster than sales over the past three months. Listings decreased 11% year-over-year in September after a 13% slide in August and are now nearly 2% below 2021 year-to-date after starting the summer 4% ahead. It’s a natural consequence of sellers pondering a cooling market and slowing price appreciation, but these numbers ultimately add to the overall inventory issue REALTORS® have grappled with for a decade.
We’ve continued to target housing supply as the number one challenge to Hoosier homeownership. Since the last Inside IAR, I carried this message to the first meeting of the Indiana Housing Task Force on September 29th. As I’ve mentioned before, this group was created by the General Assembly to focus on housing supply ahead of the 2023 legislative session (a more consequential budget year for Indiana lawmakers).
REALTORS® were given a seat at the table by virtue of their unique efforts to promote homeownership across all 92 counties while managing a comprehensive data warehouse collected through our eight MLS partners across the state.
Return of the Living Data
I was asked to draw on our data resources to present a market overview for the Task Force on the 29th. You’ve likely heard many of these points before, but repetition for emphasis can’t hurt – here are a few of the key messages I delivered to the group:
- Indiana’s housing inventory – total properties available for sale (active listings) at the end of each month – has declined more than 80% since 2011.
- Specifically, in mid-2011, monthly inventory was averaging 50,000+ (July 2011: 50,750); this year, even with lower demand and slowing sales, monthly inventory has averaged 8,000 homes per month.
- Along with other factors – aging housing stock, people staying in their homes longer – new residential building permits have been cut nearly in half from mid-2000s levels since the Great Recession.
- At the same time (2011-2021), Indiana’s population has grown by 300,000 – including net migration turning a corner after 2017, bringing 56,000 new Hoosiers (potential homeowners) into the state over the past four years.
- Rising property values are a sign of a healthy economy, building wealth for homeowners, but a chronically undersupplied market drives prices up while leaving too many potential homebuyers – especially first-time buyers – locked out by limited options and affordability.
Click the image below for the full presentation:
As inventory falls, median prices rise – click above for the full presentation.
The Task Force members appreciated the data-driven perspective on the market, made possible by REALTORS®’ ongoing investments in these resources, the expertise of our partners at the Indiana Business Research Center and their local MLS markets.
Strength in Numbers:
Ownership of our data is a competitive edge that REALTORS® bring to the public policy arena and the marketplace – but it’s far from the only one.
I was reminded again at September’s Stakeholder Meeting that the collective enthusiasm, engagement and expertise of our REALTOR® members create a powerful advantage. It was my first in-person Stakeholder Meeting as CEO, but the excitement of being together after a two-year virtual hiatus was impossible to miss.
Celebrating this year’s REALTOR® of the Year, Saba Mohammed, Distinguished Service award-winner Lori Todd and Good Neighbor awardee Barb Swartley was a highlight of the event that was even more meaningful in person. (Read more about our 2022 award winners here.)
The achievements of Saba, Lori and Barb are truly remarkable, and deserve the spotlight. But their efforts also aren’t outliers among our membership: REALTORS® are working tirelessly every day to help clients navigate this challenging climate, balancing their business commitments with contributions to their communities and the profession. This includes political action and policy advocacy, making a difference on tough issues like housing inventory.
REALTORS® command a unique position as market experts, neighbors and professionals bound by a higher code of ethics and standards for doing business – values built to withstand the current headwinds rattling the rafters of the real estate market.
So even if the September consumer inflation report released this week throws another jump-scare into mortgage rates, the long-term outlook is far from frightening for REALTORS® who stay focused on the bigger picture beyond the monthly sales figures.
Inside IAR: 8/26/2022
View Email
Recency bias and Indiana’s real estate market
I’m writing this a few days shy of my one-year anniversary as CEO of the Indiana Association of REALTORS®. It’s been a whirlwind of listening, learning and planning, most recently against the backdrop of a cooling housing market – July sales were down ten percent versus 2021, and early estimates from August predict another double-digit year-over-year decline.
I’ve put in plenty of mileage over the past twelve months meeting with members and visiting local associations. I’ve talked to many seasoned and successful REALTORS® who have been tested by recession and helped clients realize their dreams in spite of economic challenges. I come away from these conversations more confident about the future and the value REALTORS® bring to the process.
But for the last decade – longer than the average Indiana REALTOR® has been in the profession – we’ve lived through an economic expansion interrupted by the sharp-but-short COVID recession (which helped fueled a sales frenzy as real estate was more than resilient through the pandemic).
We’ve seen housing inventory decrease in ten of 11 years since 2011, tilting the market towards sellers as demand outgrew supply. And it’s been a lucky thirteen years since mortgage rates last hit 5.25 percent for a 30-year loan.
This got me thinking about the phenomenon of recency bias. It’s human nature to give more weight to recent events; our brains try to equate “now” with “normal” even if facts tell a different story. For example, a broker heading into his or her first renewal next year may see the record-breaking sales pace since 2019 as the norm.
Putting the market in perspective:
This calls for some perspective. Even with inflation at a forty-year high and the Federal Reserve raising interest rates in four of the past six months, home sales are running just five percent below last year through mid-August. Total sales are nearly a billion dollars above 2021.
Looking further back, year-to-date sales numbers are also ahead of 2020 – the start of the sales surge – and are also beating 2018 and 2019, two strong years for real estate driven by solid economic growth and positive net migration into the state.
Our mantra has been that Indiana is moving into a more balanced housing market: Sales are down and price gains are slowing, but the economic headwinds aren’t rattling the foundations of the real estate industry quite yet.
A balanced market for buyers:
The current climate is also new territory for most consumers. Demographic data tells us that the large majority of real estate customers have never bought or sold a home with mortgage rates above five percent, or during a time of economic contraction. The average first-time buyer was just graduating high school during the Great Recession.
The shifts in the marketplace over the past few months are relatively modest looking at the bigger picture. But recency bias makes change seem more dramatic, even if emerging trends are actually more typical of our housing sector. It’s up to REALTORS® to reassure and point out the opportunities.
For buyers, sales are down but conditions are looking up – starting with prices. Median home prices dropped from $250,000 to $246,000 from June to July, and preliminary August data suggest that prices are continuing to cool closer to $240,000. Prices are up versus 2021 but the month-by-month gap is narrowing: Indiana’s February median price was 18 percent higher than February ’21, while July’s median was barely ten percent over last year.
There are also more homes available after many frustrated buyers spent 2020 and 2021 pursuing a limited number of listings. June and July have been Indiana’s highest two months of housing inventory (monthly homes for sale) in nearly two years.
Of course, the upturn in inventory was partially created by lower demand as mortgage rates hit six percent in June. Rates are still volatile but have dropped as the financial markets anticipate the Fed’s actions.
Even today’s mid-five percent rates look better with a longer memory. Mortgage rates hovered above 7 percent for most of the 1990s after spending most of the ’80s well above 10 percent. Current borrowing costs also beat the 2000s average, until the Fed slashed rates in 2008.
If inflation falls again in August (and price relief spreads beyond gas prices) rates are likely to stabilize even further. Easing inflation means the tasks of saving a down payment and affording a monthly mortgage get easier too. For determined homebuyers, the market is actually moving in the right direction.
Sellers still capitalizing, even with less competition:
On the other side of the closing table, it had become commonplace for sellers (especially in faster-growing areas) to get multiple offers and see negotiations routinely escalate above the listing price.
This dynamic is certainly changing, but that doesn’t mean a more balanced market is bad news for sellers.
Even though year-over-year growth has slowed, median home prices in Indiana have increased more than 14 percent through 2022. Compare that year-to-date return to the S&P 500 with the national economy struggling through two quarters of negative GDP!
Property values are rising despite economic turmoil, positive for owners building equity and sellers entering the market. A home remains a great investment and valuable commodity. Indiana is growing, and each new household adds another reason to be bullish on real estate.
Looking longer-term at housing supply:
Both buyers and sellers can find opportunities in today’s market, and Indiana’s REALTORS® are here to help. We’re also working to address inventory challenges that limit our market: I’ve written before about the Housing Task Force created by the Indiana General Assembly to study ways to increase residential development. REALTORS® have a seat on the panel based on our advocacy and obvious involvement on the issues, and I look forward to the first official meeting coming up on September 29th.
One of our roles on the Task Force is offering an accurate, data-driven view of the housing market over time. This means pushing back on the idea that more homes for sale this year is a sign that housing supply is a less urgent issue (again, the lure of recency bias). Inventory is up because higher mortgage rates pushed buyers to the sidelines. New listings, on the other hand, have essentially flatlined, climbing less than two percent compared to 2021.
Even if a sluggish economy impacts housing for another year, we can’t ignore the decade of declining housing inventory while Indiana’s population gained more than 300,000 new residents.
Demand will recover. In the meantime, it’s up to us to help build a blueprint for housing supply that matches our future ambitions for growth. Personally, I’m looking ahead to my second IAR anniversary (and more to come) reporting on even more Hoosiers finding new homes and planning next chapters for themselves and their families, building wealth and putting down roots in communities across Indiana.
Inside IAR: 7/21/2022
View email
Market changes, class actions, and turning challenges into opportunities
Opportunities often come disguised as problems – it’s a timely adage for organized real estate: The housing sector is slowing, but a more balanced market can help REALTORS® prove their value on both sides of the closing table. And even a class-action lawsuit two states away can prompt brokers to reaffirm their pledge to client transparency and competitive marketplaces.
Let’s start in the statewide market: June data provides the clearest evidence to date that the housing terrain is shifting. More homes are available for sale – 12,000 new listings hit the market in June, and inventory hovered above 10,500 properties at the end of the month, breaking 10,000 for the first time since December 2020.
That’s good news for buyers generally after two years of high demand chasing a dwindling number of listings. But elevated mortgage rates and inflation are also contributing to supply by pushing some home-seekers to the sidelines. Closed sales are down 7.8 percent versus June 2021 and 2.4 percent year-to-date.
Median sales prices increased 13.6 percent in June (year-over-year), but this also represents modestly slower growth relative to 2021. Sellers are still capitalizing on rising values, homeowners are still building wealth – but demand has cooled from last year’s scorching pace.
REAL value – for buyers and sellers:
These changing conditions can highlight the true value of working with a REALTOR®, for buyers and sellers alike.
Homebuyers may find themselves with more choices and opportunities to negotiate better deals. They may also be forced to reexamine their budgets as higher interest rates impact monthly payments and purchasing power. Professional representation is already crucial to a life-changing investment in a new home; it’s even more important as new realities shape local markets.
On the other hand, potential sellers can’t expect a bidding war to break out over every new listing. June numbers imply fewer offers and more demanding buyers; the marketing savvy and promotional skill of a REALTOR® can pay off more directly in higher sale prices.
The power of REALTORS® working through their local MLS is also amplified in the current climate. As inventory grows, the MLS provides the most comprehensive, up-to-date resource for finding a home, and the best avenue for sellers to promote their property to the largest number of potential buyers.
REALTORS® can survive – and thrive – in tumultuous times by unabashedly selling their value to clients, claiming the role of trusted advisor and doing business with high standards of fair play and professional conduct. These ideals should always be top-of-mind but must be even more explicit as uncertainties – economic and legal – loom over the market.
From closings to courtrooms:
Many of you have likely heard rumblings about the class-action lawsuit filed in Missouri dealing with broker cooperation, specifically the routine practice of listing agents paying commissions to buyer brokers. While the litigation has no connection to Indiana, it could impact how REALTORS® do business and build competitive local marketplaces that benefit both sides of a transaction.
The Missouri suit, Sitzer/Burnett v. NAR was granted class action status in April. This is a procedural move that doesn’t reflect on its merits but does allow notifications to be sent to potential class members (individuals who sold a home after mid-2014 in portions of Missouri, Kansas and Illinois). A similar suit was actually filed before Sitzer in Illinois (Moehrl v. NAR) but hasn’t been certified as a class action (a decision is still pending).
Cutting through all the legalese, the suits ask a basic question: Why do listing brokers often pay the commissions of buyer brokers? Fortunately, we have a compelling answer.
Brokers share listings and cooperate on commissions to create the widest possible pool of housing inventory and potential buyers through the local MLS. Listing brokers agree to pay buyer broker commissions as a reasonable cost to reach more qualified prospects.
Commissions are negotiable, but cooperation incentivizes brokers to participate in competitive local marketplaces with the potential for fair compensation. Without cooperation, housing data would be fragmented, more homes would be sold through pocket listings or word-of-mouth, and the average client (and smaller brokerages) would be disadvantaged.
The current system works: Properties listed on a local MLS sell for 30 percent more on average than homes “for sale by owner” or through another platform. That’s why 90 percent of home sellers use a broker.
But the Sitzer lawsuit alleges that these sellers don’t recognize their own best interest, or that the commission process is too opaque for consumers to understand or negotiate.
The best defense against these claims happens to be good business advice in general: REALTORS® should be ready to set clear expectations with clients, operate with transparency and demonstrate their value to every deal.
- Start with communication: Detail the services that brokers provide, describe how the MLS works and be upfront about how commissions are calculated and paid – and how it all pays off when buying or selling a home.
- Don’t wait: This conversation should occur early in the process so the client feels fully informed, engaged, and aware that commissions are negotiable.
- Be open: The REALTOR® Code of Ethics (Articles 1 and 3, Standards of Practice 1-13 and 3-3) requires full disclosure of commissions and cooperation policies and allows negotiation through the process.
Following these principles is about more than responding to a misguided lawsuit. It’s an opportunity to reinforce what it means to be a REALTOR® in a market that’s changing rapidly, leaving clients looking for expertise and support.
Taking the long-term view:
There’s also a broader benefit to broker cooperation – the practice creates greater access to homeownership by not imposing another cash requirement on buyers (especially first-time buyers) since real estate commissions can’t typically be financed through a mortgage.
And even as we settle into pattern of slowing sales and price appreciation, affordability is still a threat to housing stability in Indiana. June shows interest rates and economic uncertainty putting the brakes on a frenetic market, but sales are still fundamentally strong (outperforming the first half of 2019, a record-setting year to that point at the end of a decade of economic expansion).
That’s why Indiana REALTORS® continue to advocate for long-term solutions to housing supply challenges and remain committed to helping clients navigate the inevitability of future change.
Inside IAR: 6/23/2022
View email
Indiana’s housing market – undersupplied, not overvalued
The Fed raised its benchmark interest rate three-quarters of a percent last week as inflation remains stubbornly resistant to its efforts to control consumer prices and orchestrate a soft landing for the national economy. The increase drove 30-year mortgage rates past six percent as U.S. home sales continue to fall.
That’s a lot of unpleasant real estate news packed into one paragraph, and the circumstances have sparked grim speculation about plummeting home prices. It reminds me of the old joke about economists successfully predicting ten of the last five recessions – reports of impending doom are easily made and quickly forgotten.
I’m more bullish on prospects for the Hoosier housing sector: Rising interest rates will hit demand and we’re heading into a more balanced market, but residential property values in Indiana should prove more durable than our current economic challenges.
Popping the housing bubble predictions:
Forecasting a sharp ‘correction’ in home values presumes they were artificially inflated to start with – in other words, that we’ve been in another bubble. It’s true that prices have risen dramatically in this hypercompetitive market.
But it’s a much different dynamic than the years leading into the Great Recession, when the housing sector was super-charged by risky lending practices designed to feed mortgages into the securities market. Recent price increases are shaped by more fundamental forces – a widening gap between supply and demand.
Sales are still brisk and supply is still low:
Indiana reached 8,646 closed home sales for May, beating last May by 164 properties. Year-to-date sales are flat compared to 2021 but 4.4 percent above 2019. This is contrary to the national market, with May sales trending five percent below last year.
Listings this year are up about 4 percent, but there are 50 percent fewer homes listed now versus the end of May 2019. Housing inventory has been declining on an annual basis since 2011, with a single brief uptick in 2014.
What are some of the longer-term factors driving the imbalance between housing supply and demand in Indiana?
Indiana is growing. After nearly a decade of negative net domestic migration, Indiana turned a corner in 2018: 4,300 more Americans moved into the state than away, a number that surged to 14,280 in 2021. Combined with solid international migration, we’ve gained 54,000 new Hoosiers in the past four years.
Our new neighbors need places to live. And with Indiana’s net earnings outgrowing the nation in 2021 (9.7 percent to 8.9 percent), they’re generating personal income to support our housing market.
We’re wrapping up a record-breaking six months for economic development. The mid-point of 2022 also marks a $15 billion streak of business investment wins for Indiana, including massive new manufacturing projects in Boone County (Eli Lilly) and Kokomo (Stellantis). Commercial growth and job gains create the need for housing capacity.
Communities can’t compete (and companies can’t hire) if potential residents and recruits can’t find affordable, appealing places to call home. Lack of housing forces workers further from employment centers and creates a tougher climate for businesses looking to grow.
Indiana policymakers recognize the symbiotic relationships among talent, quality of life and economic development. The READI program is investing $500 million (and seeking to leverage billions in follow-on public, private and philanthropic funding) in strategies to promote population growth.
But the catalysts fueling housing demand are colliding with an undeniable reality – a decade-long decline in inventory.
Housing inventory: There are many issues behind Indiana’s relative housing shortage. New housing starts are stuck at roughly half the state’s mid-2000s levels, while our population has grown more than 500,000. Homeowners (including Hoosiers) are staying in their houses longer: Median tenure has grown from 10 years in 2008 to more than 13 years today. Indiana also had a higher home vacancy rate than the nation through much of the 2010s, and lower levels of renovation.
All of these factors add up to monthly inventory (unduplicated totals of new home listings) that has fallen by more than 80 percent since 2011, even though the numbers have nudged higher this year.
Today’s housing market isn’t overvalued, it’s undersupplied. As determined buyers pursued a dwindling number of options, Indiana home prices have risen for 64 straight months (and counting), including a 7 percent increase in 2019. That’s a pre-existing condition, not a pandemic-created bubble.
NAR’s chief economist, Lawrence Yun, has predicted that home sales will fall by 15 percent and growth in average prices will slow to around 5 percent nationally by the end of 2022. Given Indiana’s level of unmet demand, we could easily see a smaller dip in sales and prices continue to grow modestly ahead of these projections.
So what comes next?
The big question is how much the latest interest rate hike will impact demand. It’s been decades since we’ve seen the Fed raise rates at such a rapid pace, with mortgage rates rising in tandem. For a $200,000 30-year fixed rate mortgage, monthly payments are roughly $400 higher now than the same loan made last November or December.
The combination of interest rates and inflation is especially tough on first-time buyers. Listings under $150,000 have taken the most dramatic hit in the last four years, adding to the affordability challenge that’s beginning to undercut Indiana’s low cost of living-meets-high quality of life message to prospective residents and employers.
Looking ahead, more residential development at all price points is still needed to maintain a healthy housing market that’s positioned for growth beyond this economic turmoil.
For now, Indiana is still a seller’s market, even though inventory is up and demand is softening over the first half of 2021. We’re moving into a market that’s more balanced between buyers and sellers, raising the stakes for REALTORS® who can help clients navigate the changing climate and act as trusted advisors.
Housing is unsettled by external forces like interest rates and inflation, but prices aren’t headed for a cliff – in fact, a gentle upward slope is a more likely scenario. We can still say with confidence that buying a home is still one of the best investments Hoosiers can make in the future.
Inside IAR: 5/26/2022
View email
Assessments, bills and caps – the ABCs of Indiana property taxes
With household budgets already feeling the pinch of inflation from the gas pump to the grocery store, many Hoosier homeowners are apprehensive about their property taxes: Rising home prices in 2020 are reflected in current bills, and new assessments are based on last year’s frenetic sales pace that pushed average prices up 13 percent statewide.
But tax bills moving in tandem with property values are a natural result of pro-taxpayer policies that protect homeowners from even larger, less predictable increases. REALTORS led the fight for dramatic reform during the property tax crisis that reached a crescendo in 2007 and 2008, most notably Indiana’s constitutional tax caps.
Without the caps, today’s homeowners could be facing higher tax rates applied to rising assessed values without any mechanism for holding their bills in check.
The majority of today’s REALTORS joined the profession within the last decade, so it’s worth a look back at how we got to the current system and the challenges that remain – most notably, housing inventory that continues to lag below demand.
From tax court to tax caps:
It started with a final decision in a seven-year marathon of litigation over Indiana’s property tax system (The Town of St. John et al vs. Indiana State Board of Tax Commissioners). In 2000, the Indiana Tax Court ordered a move to assessments based on the market value of real property.
This meant major increases to properties undervalued under the previous rules, especially older homes in neighborhoods with rising sales prices. After 2003, the residential share of statewide property tax collections jumped from 36 to 45 percent as assessments rose to match the market.
By 2007, the housing bubble had further inflated property values and the elimination of business inventories from the property tax base had saddled homeowners with responsibility for a bigger share of the total base. A full-fledged tax revolt was brewing in response to surging bills.
REALTORS advocated aggressively for reform on behalf of homeowners and housing affordability. In 2008, Governor Daniels and the General Assembly passed a tax package that increased homestead exemptions and capped property tax bills to a fixed percentage of assessed value – a cap of 1 percent for residential properties, 2 percent for agricultural land and multi-family housing and 3 percent for commercial property.
Through the IAR, REALTORS were among the strongest champions of the caps, and they paid off: From 2010 to 2011, residential property taxes were effectively cut more than a half-billion dollars.
Are the caps starting to crack?
If individual tax bills do hit these caps (later added to the state constitution in 2010), revenue losses are absorbed by the taxing districts overlapping the affected properties. IAR also aggressively promoted local government reform to promote efficiency and minimize the effects on public services. Nearly a thousand township assessor positions were eliminated to bring professional, predictable consistency to property assessments at the county level, but other attempts to consolidate local offices largely failed to gain traction.
Tax bills still increase if property values rise, but homeowners are also building wealth and equity. And the growth of total property tax collections by county (the maximum levy) is also limited to a six-year trend of Indiana income – tax rates are constrained by the combination of caps and levies.
This complex set of rules has given Indiana one of the most attractive property tax climates in the nation. While the caps provide shelter from erratic and unaffordable tax increases, the last few years have seen the tax burden shift towards residential properties as home prices rose and agricultural and commercial assessments dropped.
But any attempt to provide relief from this shift can’t compromise the top priority – accurate assessments aligned with the market are the basis of a fair tax system that passes constitutional muster.
Hancock County assessor Katie Molinder had a simple explanation in a recent Greenfield Reporter article: “‘The easiest way to think about it is if you were to put a for-sale sign in your yard,’ [she often tells] property owners…If you’d list your home for the amount at which it’s assessed, the assessment is fair.”
Make the case for fair assessments:
But assessments aren’t always on target, and assessing practices aren’t perfect – giving REALTORS a perfect opportunity to act as advisors and advocates for current, former and potential clients.
Assessments aren’t appraisals; they’re calculated by collecting basic information about a home and applying sales data from the surrounding neighborhoods, not a thorough examination of individual properties. This is where REALTORS can bring expert knowledge to the aid of homeowners attempting to navigate the process, examining their assessments and helping file appeals if homes appear to be overvalued.
Indiana’s Department of Local Government Finance has a good step-by-step overview of assessments and appeals in its Citizens Guide to the Property Tax (along with the relevant forms and contact information). But though the outcomes of some assessments won’t stand further scrutiny, the upward trend is clearly driven by larger forces.
Restore supply and demand:
It’s a recurring theme in these commentaries, but lagging inventory is an underlying culprit for rising prices. There’s an obvious difference between a strong seller’s market and prices that are inflated by housing supply that hasn’t fully rebounded from the Great Recession. Indiana needs new residential construction to restore some balance between supply and demand and bring prices into a sustainable trajectory – assessments (and tax bills) will follow.
One more thing – simplifying the tax code:
We continue to work to refine the system to benefit buyers, sellers and owners, and the last legislative session brought another modest step forward: The General Assembly (via HB1260) acted to simplify Indiana’s tax code by eliminating the state mortgage deduction (starting for taxes payable in 2023) and raising the standard homestead deduction from $45,000 to $48,000 to neutralize the impact. In effect, this means less paperwork at closing and no change in tax burden.
In fact, this tradeoff extends relief from rising bills by reducing assessed values to Hoosiers who don’t have a mortgage or have failed to file the mortgage deduction (or forgotten to re-file after refinancing their homes), making it a more far-reaching benefit.
REALTORS should be prepared to explain the change and reassure clients that it’s a positive development, addressing any confusion with the federal mortgage interest deduction or lingering concern that some benefit is being lost.
‘Reassurance’ is actually an appropriate theme for the summer, amid simmering concerns over assessments, interest rates and housing affordability. Growing property values are part of a healthy economy, and Indiana’s system still offers ample protection against unreasonable bills. Our agenda will focus on expanding housing inventory and options at all price points, attracting new residents to Indiana and promoting development policies that broaden the tax base – the best blueprint for making the tax caps work for homeowners.
Inside IAR: 4/19/2022
View email
Five decades after the Fair Housing Act, REALTORS® work to deliver on its promise
April is Fair Housing Month, commemorating the passage of the landmark federal Fair Housing Act in April of 1968. It’s appropriate that this anniversary comes with the traditional springtime surge of new listings, a reminder of the importance of fair play and non-discriminatory practices leading us into the heart of homebuying season.
Like all successful entrepreneurs, REALTORS® are results-oriented – so let’s start with the unfortunate bottom line: More than fifty years after the Fair Housing Act passed, the gap between Black and white homeownership rates has widened to nearly thirty percent.
The Act prohibited explicit housing discrimination, overturning policies like racial covenants, and redlining that were pervasive across the United States. But it failed to address the accumulated injustices and compounding economic losses created by these practices.
Black Americans were largely shut out of the housing boom that followed World War II, missing out on decades of equity, wealth-building, and investment in one of the most significant sectors of the U.S. economy. Each subsequent generation begins their journey towards homeownership further and further behind the starting line, even after the Fair Housing Act cleared obstacles from the path ahead.
Alexia Smokler, NAR’s Director of Fair Housing Policy & Programs, detailed some of these challenges at a state legislative briefing we hosted earlier this year (I’d recommend watching the full presentation here – it’s worth twenty minutes of your time): She notes that white buyers are twice as likely to finance a home purchase with the sales of a previous residence, a tremendous head start bestowed by higher homeownership rates.
Conversely, Black homebuyers are forced to save larger down payments from lower average incomes and are three times more likely to tap into retirement savings. Because twice as many Black households are also working off student loan debt, family budgets are even leaner against the daunting task of building a nest egg.
A survey analysis released this month by NAR (“2022 Obstacles to Homeownership”) notes that white homebuyers are twenty percent more likely than Black and Hispanic homebuyers to have parents or guardians who are homeowners. This illustrates the generational challenge facing people of color in pursuing the often-daunting process of finding and purchasing a first home.
Access and equity:
These issues are amplified in today’s competitive climate of record-high housing prices and record-low inventory. Another recent NAR report confirms that the typical American home is thirty percent more expensive today than in 2019, calling rising costs and limited inventory “double trouble” for real estate.
Quadruple trouble doesn’t have the same ring to it. Still, surging inflation erodes these savings, and rising interest rates add to the cost of mortgages. You have a confluence of circumstances that are especially difficult for first-time homebuyers.
This only solidifies the long-term disparities that undercut the full potential for Black homeownership.
It’s been a recurring theme in these columns, but when supply is consistently stuck below demand, prices rise…and Indiana hasn’t enjoyed a year-over-year increase in inventory since 2014. New housing starts are stalled at two-thirds of 2005 levels, and statewide sale prices have risen 61 consecutive months and counting – pushing more potential buyers to the margins of the market with each passing month.
In short, the history of housing since the passage of the Fair Housing Act shows that equality in legal rights and protections doesn’t guarantee equitable access to the American Dream, especially as affordable housing options are increasingly scarce in Indiana and across the nation. So how do we move from making sure everyone plays by the same rules to actually leveling the playing field?
Affordability is a priority:
Affordable housing development is crucial to opening the market to new and first-time buyers. The ‘Obstacles to Homeownership’ survey confirms that affordability is the most significant barrier facing homebuyers of all backgrounds and ethnicities.
It’s time for a new real estate mantra alongside “location, location, location” – we also need “construction, construction, construction” to increase inventory and improve affordability across the board.
As we’ve reported, the General Assembly took a few modest steps to address widespread housing shortages this session. Lawmakers created a statewide housing task force to examine and report on obstacles to affordable and workforce housing development, and REALTORs will be deeply engaged in its deliberations.
The legislature also expanded tax credits for affordable housing construction, aligning Indiana with federal housing incentives.
We’ll also continue the fight alongside NAR at the federal level, where $25 billion will be allocated to affordable housing production for low-income Americans while securing $1.75 billion in grants for state and local governments for affordable housing solutions and pro-growth zoning reform.
A fair play policy agenda:
It’s naïve to pretend that fair housing has become an issue of supply and demand. Nearly forty percent of Black homebuyers still report racial discrimination in their experience; the Fair Housing Act has left us with systemic challenges and unfinished public policy concerns. Uprooting biases in the home appraisal process is one of these confounding issues.
At the federal level, REALTORS® worked closely with the Department of Housing and Urban Development in developing a strategy to address concerns and improve public trust in the appraisal profession without undermining the soundness of the market.
Champions for change:
You’ve heard the term “Think globally, act locally.” When it comes to fair housing, REALTORS® are active partners in addressing affordability challenges, as limited inventory adds to inequitable outcomes. Our federal and state policy platforms aim to strengthen the Fair Housing Act and advocate common-sense solutions in areas where the Act is silent.
But change starts with individual REALTORs as champions of fairness. Article Ten of the Code of Ethics clearly states, “REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity [or] be parties to any plan or agreement to discriminate against a person or persons…”
It’s up to us to live those words through daily activities and working proactively to welcome all clients.
This brings up a final point about professionalism and how REALTORS® should inspire confidence in a fair and transparent housing market. It’s tempting to celebrate fast closings and sales soaring over the asking price, but too many self-congratulatory social media posts risk undercutting the role of REALTORS® as trusted advisors to buyers and sellers, empathetic to their experiences and eager to help them succeed – not to mention, these posts make you vulnerable to scams and other safety risks. Let’s not just be advocates for our businesses, but ambassadors for an American dream that is accessible to all.
Inside IAR: 3/17/2022
View email
Spring forward
Last week, the General Assembly adjourned with compromises on tax relief and concluding the COVID health emergency, updates to the state’s economic development toolkit, and more. We also compiled a winning record on housing issues: IAR’s government affairs team took care of business (yours), and with ‘sine die’ in the books, we’re ready to spring forward into the traditional homebuying season. But first, a recap and a few observations.
Let’s start with the tax package that made it to the fiscal finish line. House Bill 1002 gradually reduces Indiana’s income tax from 3.23% to 2.9% and eliminates two utility taxes to generate savings for ratepayers. By 2029 the plan gives us the lowest flat rate of any state with an individual income tax, another point for our appealing affordability. (It also helps broker companies organized as pass-through entities keep – and reinvest – more of their earnings.)
On the other hand, business personal property reform didn’t make the cut (pun intended) as lawmakers expressed concerns about the impact on local budgets and consequences for other taxpayers – concerns we shared, as I explained last month.
There’s a symbiotic relationship between economic development and the housing market –last week, I heard this saying at the Association Executives Institute: no homes, no jobs – but our top priority is protecting homeowners by protecting the integrity of our constitutional property tax caps. Reducing assessments on business equipment would shift more of the burden to residential property under the caps since rising home values also raise the ceiling for individual tax bills.
Success isn’t cheap:
Indiana’s combined state and local income tax burden (per capita) is nearly 20% less than the 50-state average. A dozen states cut income taxes last year, capitalizing on robust recoveries from short-lived COVID recessions. HB1002 allows Indiana to leapfrog these peers and sharpen our competitive edge on personal taxes.
But we also recognize the limits of cost as a catalyst for growth. Indiana’s Secretary of Commerce, Brad Chambers, has laid out a new blueprint for economic development that combines our traditional strengths in tax and regulatory climate with an “aim higher” emphasis on place-making and asset-building, making talent a priority to lean into advanced industry opportunities.
The same lessons apply to housing. Affordability matters and taxes are part of the equation. But houses aren’t commodities – successful REALTORS® sell communities. That’s why we balance endorsements of tax reform with advocacy for state and local quality of life initiatives.
In addition to expanding state incentives, new legislation (Senate Bill 361) empowers local governments to create worker relocation programs. We encourage REALTORS® to engage in these partnerships as we push for state-level investments through next year’s budget process. But these efforts can’t just position Indiana as the cheapest place to live.
Strong housing markets support quality public services and amenities. A recent analysis by Ball State University economist Michael Hicks (via the Brookings Institution) studies the ‘premium’ associated with livability across the Midwest – what drives higher home prices, employment and earnings – and identifies public school quality and other community attributes with sustained population growth.
Tax relief isn’t sufficient as a talent strategy. Cutting business personal property taxes also erodes the base shared by school corporations. State revenues need to keep up with education budgets, infrastructure demands, and programs like READI that also help attract new Hoosiers.
On the supply side:
(That’s a Laffer Curve reference for you tax policy aficionados.)
Limited inventory was a pre-existing condition for local housing markets that worsened through the pandemic as a persistent challenge for potential buyers across Indiana. Housing supply – especially the need for affordable and workforce options – isn’t a short-term challenge and won’t be solved overnight.
But this session did see a few promising steps forward on housing supply and stability issues. House Bill 1306 creates a statewide housing task force to examine and report on obstacles to workforce housing development, including a REALTOR® representative to provide a practical perspective on the marketplace. Senate Bill 382 was amended in the final weeks to include new tax credits for affordable housing construction, hopefully a precursor to a more comprehensive push on this issue.
We also played defense on a policy that at first glance seemed deceptively pro-growth. Community Infrastructure Improvement Districts (Senate Bill 370) appeared to be a new tool for residential development. Actually, they were a mechanism to spread the upfront costs of new development among surrounding homeowners through special assessments – up to 30% of a home’s value, which is a type of new tax levied outside the property tax caps.
Protecting a more vulnerable market segment, House Bill 1214 ensures that eviction records can be expunged if circumstances are beyond the renter’s control while pushing the state to deploy remaining rental assistance. These common-sense actions help keep the door to future homeownership open to renters working through these challenging times.
Who runs the world?
On all these issues and a litany of others, IAR’s Senior Vice President of Government Affairs, Maggie McShane, was an aggressive, well-informed champion of pro-housing policies around the Statehouse – a role she’s played since November 2010.
It made me think about and appreciate anew our association’s exceptional group of professionals, especially during this Women’s History Month. Along with Maggie’s leadership on the legislative, political, and regulatory fronts, I’m surrounded by an all-female senior staff, including:
- Richelle Mossler, General Counsel
- Stacey Hartman, Vice President of Communications
- Janet Haley, Controller
- Janice Childress, Vice President of Data Analytics
And I’ll highlight Senior Vice President Kathy Harbaugh, who’s been an indispensable member of IAR’s executive team for more than a decade, bringing invaluable institutional knowledge and professional insight as a Broker and former association executive. Kathy also represents an intergenerational commitment to the profession – her mother, Patricia ‘Pat’ Pencek, was IAR’s first female president in 1983. We’ve had eleven women in the top spot since, and our 12th – Carmel’s Lynn Wheeler – is on deck for 2023.
Indeed, nearly 60% of IAR’s members are women, reflecting the ranks of REALTORS® nationally. Real estate has been a source of professional opportunities for women since the early 1900s, often outpacing the broader push for gender equality: More than a decade before the 19th Amendment, women were voting members of NAR. And female REALTORS® were successfully closing deals for decades before the Equal Credit Opportunity Act of 1974 assured women the right to apply for mortgage loans regardless of marital status or without their husband’s permission.
We still have work to do elevating women’s voices in leadership roles throughout the real estate and extending homeownership to more female-led households. But we represent a pioneering profession, and I’m confident from my own daily experiences here at the office and meeting members across the state that no glass ceiling is sturdy enough to resist being shattered by the determined efforts of Indiana REALTORS®.
Inside IAR: 2/23/2022
Equity, opportunity – and inventory – in Indiana real estate
In January, the data made it official: 2021 was another record-setting year for local housing markets in Indiana, with closed home sales just a few properties shy of 100,000 and frenetic activity pushing average prices up almost 13% versus 2020. It was a great year to be a REALTOR®.
But we need to take an off-ramp from our victory lap to acknowledge the other side of this boom: Low housing inventory has fueled competitive conditions across the nation, and Indiana hasn’t seen a year-over-year increase in inventory since 2014. We’ve welcomed more than 210,000 new Hoosiers in those eight years, adding pressure to the marketplace.
When you combine determined buyers, tight inventory, and historically low-interest rates, you get the fierce competition and median price increases we’ve experienced for 60 consecutive months (and counting). That’s welcome news for sellers and current homeowners building wealth, but it’s a challenging climate for first-time buyers and those without the savings or equity needed to get into a home. Rising interest rates will keep eroding their buying power.
Ultimately, this residential market is leaving too many Hoosiers behind, and not all the reasons are as straightforward as supply-and-demand.
Fair play and equitable policies in housing:
It’s important to highlight this reality as we conclude Black History Month. As we honor the contributions, accomplishments, and sacrifices of African Americans, let’s recognize that housing discrimination is an undeniable chapter in the unfinished struggle for justice and equality.
More than fifty years after the passage of the federal Fair Housing Act, there’s more work to be done. REALTORS® are proudly part of the solution as the most vocal champions of expanding housing opportunities.
A home is the biggest investment most Americans will ever make and the best for building long-term wealth. Racial disparities in homeownership reflect wider economic inequality and longer odds for upward mobility and financial security. Individual REALTORS® are on the front lines of closing these gaps by guiding new buyers through the process as their advocate and advisor.
And collectively, we’re working to fulfill the first policy statement among IAR’s 2022 legislative platform – “ensure the benefits of homeownership accrue equally across races.” Our longstanding commitments to fair and transparent practices, high professional standards for property appraisals and assessments, and defending consumers against fraud also support a more equitable housing market for all Hoosiers.
Building a buyer’s market:
I opened with the observation that low inventory has been a reality of Indiana’s real estate sector for years. We pride ourselves on being a state that offers “more house for the price,” but last year’s research from NAR shows that while 78% of white Hoosier households can afford our typical home, only 53% of Black households have the same purchasing potential. (The 2022 Snapshot of Race and Home Buying in America report yesterday issued by NAR did not include this particular statistic.)
This ratio is no better than the rest of the nation, and we need to aim higher. Inventory and affordability are tied together – any blueprint for opening our market to new buyers starts with new residential development. National data also suggests that Black homeownership rates are higher in metro housing with more building permits and housing starts per capita. Our advocacy agenda includes impact analyses to discourage anti-growth ordinances, tax incentives for new construction, and other policies to promote workforce and affordable housing.
The outlook for new state housing tax credits (Senate Bill 262) is uncertain in the Indiana General Assembly this year, but a statewide housing task force (House Bill 1306) will likely be empaneled to focus on these challenges before next year’s budget session, including a REALTOR® representative.
Protecting affordability in the tax code:
Taxes are another affordability factor, and we’ve been weighing the long-term implications of legislative debate over business personal property tax (PPT) reform. Last week, the $1.4 billion House tax cut plan (House Bill 1002) collided with a skeptical Senate Tax & Fiscal Policy Committee, which stripped most of the bill (including its PPT provisions).
In taking a more cautious approach, Senate budget leaders cited the local impact of lowering the depreciation floor on business personal property (which accounts for more than 17% of statewide property tax collections). HB 1002 uses state tax credits to deliver part of this relief but would still eventually result in over $100 million lost annually to cities, counties, and school districts.
We support a competitive tax climate, but also value fiscal responsibility and preserving the local quality of life (and state programs like READI) without putting an undue burden on homeowners.
That’s another urgent concern about business PPT reductions: Reducing assessments for business equipment reshuffles the total tax liability among other types of property under Indiana’s property tax caps. REALTORS® fought hard to cap residential tax bills to 1% of assessed value and bring certainty to homeowners and buyers but narrowing the overall tax base undercuts this successful push.
A recent report for the Association of Indiana Counties by former Senate fiscal analyst David Reynolds and retired Purdue economist Larry DeBoer confirms that residential property is already shouldering more of the burden as rising home values create more capacity under the 1% cap. Residential properties accounted for 42.5% of all collections in 2017; that rose to 45.6% last year, and the authors project homeowners will be responsible for half the total tax liability by 2026.
Residential tax bills are already rising more than 6% a year; any reduction in PPT assessments will accelerate this trend. We’ll continue to fight for the integrity of the tax caps and against other threats – for example, rallying to help defeat a short-lived plan to extend the state sales tax to services, including real estate transactions (House Bill 1083).
These issues are interconnected: Increasing equity, access, and affordability in housing, adding new inventory to expand our market, and advocating fair tax policies that balance homeowner protections, economic development, and local livability. These priorities demand a full-court press from IAR, and you’ll read more about how we’re picking up the pace with home buying season right around the corner.
What’s going on at IAR:
- The Legal department is producing video #8 in our series on IAR forms. It will cover the new Notice of Termination and is expected to be out next week.
- Attorneys are proactively enforcing the copyright of IAR forms by way of cease-and-desist demand letters. Reminder, IAR forms are for use by IAR members only.
- Professional standards training is scheduled for March 17 & 18. It will be led by Diane Disbrow over Zoom. Courses include Understanding the Role of the Grievance Committee, Professional Standards Committee Training, and Role and Responsibility of the Board of Directors.
- Attorneys are updating the online legal library, as well as revising and recording certain modules in the RECP post-licensing course.
- Delegation Days have wrapped up. Delegation Days is a series of meetings with REALTORS® from one of IAR’s governance regions and state legislators from that area. Discussions were tailored to the local associations attending and the strategic legislative priorities for the week, though partnerships, fair housing, and market activity were consistent discussions. Taking a group of members to the Statehouse weekly has made an impression with many legislators remarking, “REALTORS® are always here!” That’s exactly what we were going for and plan to bring this program back next year.
- Congratulations to past IAR presidents Bruce Bright and Bernice Helman who will this year be inducted into the RPAC Hall of Fame because of their $25K lifetime investment.
- The filing deadlines for the 2022 primary election have passed and we are excited to see several more REALTORS® running for office. We look forward to an even bigger presence in “The Room Where It Happens.” Any Hamilton fans out there?
- We’ve secured exclusive access to the National Museum of African American History and Culture for Indiana REALTORS® attending the NAR Legislative Meetings. We’ll gather for a reception, dinner, and access to all exhibits either on your own or by docent-led tour. Mark your calendar for Wednesday, May 4 from 6:30 to 9:30 p.m. ET. See the entire advance message we sent last week here.
- Membership appears to be returning to its normal pattern in 2022 with a slight dip in February. Totals are expected to rebound in March, following the same pattern observed before the beginning of the pandemic. Overall, membership for this time of year remains at a more than 10-year high.
- Year #2 of Member Benefit CE is underway. This means that if you need to complete CE you can do so online/on-demand and for FREE through our school, RECP. Since this is Black History Month, we’re featuring the following 2-hour Broker CE class – Fair Housing: History and Current Events. This class is one of four classes you can take to earn up to 12 hours. Click here to see the other three class titles and learn how to access your Member Benefit CE. Reminder, newly licensed Brokers do not need to complete CE right away. See what you need to do instead.
Inside IAR: 1/20/2022
Message from CEO Mark Fisher:
State of Growth
I recently read a survey that reported far fewer Americans made New Year’s resolutions for 2022. Bad news for gym owners and diet gurus, but I suppose the reluctance is understandable after the tumult of the last two years.
I don’t share this attitude, however. I’m excited to start my first full year with Indiana’s REALTORS®, representing thousands of successful entrepreneurs dedicated to helping their fellow Hoosiers realize the American dream. Their example inspires my resolve to think big about the year to come, especially as we pivot from a pandemic-influenced marketplace into the future.
Building on the Basics:
Housing has been the most dynamic sector of the U.S. economy through COVID as ‘stay-at-home’ imperatives prompted many of us to rethink how (and where) we live and work. Indiana was already coming off a record-setting year for home sales in 2019, and closings surged more than 10% over the next twenty-four months.
We expect the market to stabilize in 2022, but Indiana’s residential sector remains fundamentally strong. Our homeownership rate has outpaced the nation for decades, an advantage that’s now nearly 10%.
And with overall lower cost of living and a property tax burden roughly 30% below the 50-state average, we have the appeal of affordability even as tight inventory has pushed prices higher.
But growth is the catalyst for building on these basics – wage growth, growth in housing options and overall supply, and sustained population growth that brings more buyers to the market.
Wanted: More Hoosiers
These thoughts came to mind as I joined past IAR President (and Howard County Commissioner) Paul Wyman in attending Governor Holcomb’s State of the State last week. The Governor had invited the two of us to watch from the gallery as he touted Indiana’s successes through these challenging times:
- Surging revenues pushing the state surplus towards $5 billion projected by the end of June, while maintaining one of the nation’s lowest tax burdens;
- Putting $3.6 billion into planned 2022 road projects, $350 million in broadband expansion, and $150 million for trails and greenways (the infrastructure of livability); and
- Leveraging this growth to boost K-12 spending by $1.9 billion over two years (and we know that the quality of local schools is a key factor in homebuying decisions);
- An aggressive economic development effort driving GDP and personal income growth above our Midwestern neighbors, with unemployment dropping to 3% as the job market rebounds.
This litany of data points make a compelling case for Indiana as a great place to call home, and the Governor also cited our best-in-the-Midwest population gains, noting a recent U-Haul survey showing Indiana jumping from #12 to sixth on its migration-based ‘Growth Index’ for 2021.
But our population trends aren’t all positive. Indiana ranks 29th in overall growth since 2010, our third consecutive decade of slowing population gains. The majority of our 92 counties are steadily losing people.
Selling Indiana:
For that reason, the Regional Economic Acceleration and Development Initiative (READI) was a welcome highlight of the State of the State. Governor Holcomb and the General Assembly created the $500 million grant program in 2021 to support quality of life and talent attraction partnerships.
READI encourages cooperation across city and county lines, engaging public, private and non-profit partners in transformative projects designed to recruit new residents, employers and investment. After a frenetic planning process over the summer, the first READI awards went to seventeen regions spanning every county in Indiana. Based on the overwhelming response, Governor Holcomb has already signaled his intent to seek “READI Round Two” in the next state budget.
We support forward-thinking investments in stronger communities: In recent Census data on reasons behind residential moves (the American Housing Survey, 2015-2021), “housing options & community attributes” were the most important factors for a plurality of respondents (37%).
REALTORS® are among the most effective ‘quality of life’ ambassadors, passionate about promoting our unique small towns, thriving cities and family-friendly suburbs – each of the nearly 100,000 home sales recorded last year represents a vote of confidence in Indiana. But less than a third of current READI funding is targeted to housing-related plans; we need to be ready (no pun intended) to push innovative strategies for residential development in the next round.
Protecting Progress:
Programs like READI and the Destination Development Corporation’s ‘Hoosier by Choice’ campaign put Indiana on offense in the competition for human capital. But IAR is also focused on protecting past wins – and playing tough defense – on issues like private property rights, a pro-homeowner tax climate, fair annexation and eminent domain policies and many more.
Inventory is clearly an issue, and we’re working with lawmakers on workforce housing incentives and ways to demolish hurdles to residential construction. We’re also keeping an eye on plans to reduce business property taxes, promoting economic development while guarding against higher residential tax bills.
The list goes on; a legislative session is one place where careful appraisals and inspections are a must.
New Year, New Challenges:
As you keep reading, you’ll find plenty more positive news – expanding professional development opportunities for members, strong financial support for political advocacy, even the profitable management of REALTORS® headquarters office space in downtown Indianapolis.
It’s my privilege to work with the team behind these accomplishments, to inherit a legacy of success from Karl Berron with the guidance of tremendous volunteer leadership.
But to paraphrase Mark Twain, “Standing still is falling behind.” REALTORS® don’t passively wait for listings or potential buyers…they proactively pursue new opportunities. You can count on the same attitude from IAR, and I can’t wait to see what the next twelve months will bring.
- On November 15th, IAR co-hosted a Housing Summit for new legislators with Habitat for Humanity and the Indiana Builders Association. Freshman legislators from across the state participated in a half-day session, which included a special presentation by the NAR Senior Policy Representative for Fair Housing, Alexia Smokler; an economic update from Elliot Eisenberg, “The Bowtie Economist;” and a panel discussion of lobbyists representing the three host organizations. The summit focused on homeownership. The objective of the summit was to provide legislators with a solid understanding of policy issues impacting housing inventory in Indiana and to share housing market data in advance of the 2022 legislative session. Legislative leaders from both Houses also joined the new members. We hope to reprise the Housing Summit each year to serve as an idea exchange for solutions to meet the growing needs of both existing Hoosier homeowners and prospective homeowners.
- Federal Political Coordinators for 1st CD Congressman Frank Mrvan, Jr. (D-Hammond) and 5th CD Congresswoman Victoria Spartz (R-Carmel) organized meetings with their Members of Congress and local associations in their respective districts. REALTORS® shared recent markets reports and concerns about housing inventory, rental assistance, and maintaining tax advantages for investors, such as 1031 like-kind exchanges. Many thanks to the staff at GNIAR and MIBOR Realtor Association for helping arrange these important meetings.
- Will host a series of Delegation Days for local associations beginning January 24th and continuing each Monday through the end of February. Local association leaders and staff will attend the half-day event at the REALTOR® Building. Delegation Days represent a shift in our advocacy effort at the Statehouse, enabling us to bring members together with legislators in smaller, more intimate group settings. These smaller meetings will also us to connect our grassroots with policymakers in a much more targeted and strategic fashion.
- Started the popular forms video series in 2021, answering the most frequently asked questions and sharing the need-to-knows about seven of our forms
- Hosted the Legal Update + Legislative Outlook CE event on January 10th that covered lawsuits, competition, E&O insurance, fair housing, forms changes, Code of Ethics changes, the Attorney General’s complaint investigation process, and a state legislative session preview
- Planning a two-day Grievance and Professional Standards Committee training on March 17 & 18 featuring Diane Disbrow
- Launched year number two of the Member Benefit CE program – 12 hours of online CE each year at no additional cost
- At a brief meeting in December, the IAR Board of Directors elected two vice presidents: Jennifer Parham of Merrillville and Kim Ward of Fort Wayne
- The next IAR Board of Directors meeting is February 1st which will kick off the association’s strategic planning
- Leadership Academy Class of 2022 convened for a day at the Statehouse in December and conducted a mock committee hearing and session
- Leadership Team has been traveling the state, helping local associations conduct their officer installations and giving IAR updates
- Volunteer Interest Profile remains open for those who want to get involved with IAR
- Launched two new monthly emails – Capitol and Market for the general membership and Inside IAR for leadership – averaging a 56% open rate, which is above industry standard
- Revamping IndianaRealtors.com for a better mobile experience and connection with member database