The Indiana housing market underwent dramatic changes from 2018 through 2023, especially for budget-conscious homebuyers earning under $250,000 per year. During this period, home prices in the Hoosier State surged, inventory became tight, and competition intensified. Middle-income families – which make up the vast majority of Indiana households – faced both new opportunities and new challenges in pursuing homeownership.
Indiana’s Housing Market Overview (2018–2023)
By the early 2020s, Indiana was in the midst of an unprecedented housing boom. Home prices rose rapidly – the median sale price jumped from around $157,000 in 2018 to roughly $242,000 by mid-2023, an increase of over 50%. This equates to about 10% average annual price growth since 2018, far above historical norms.
Even after the frenzied peak of 2021, prices remained elevated. For example, the Indianapolis metro’s median home price was about $219,000 in August 2020 but hit $305,000 by August 2023 (a 40% jump). Such rapid appreciation far outpaced income growth and general inflation, creating affordability concerns for many Hoosier buyers.
Market Drivers
Several factors fueled this price surge:
- Record-low interest rates in 2020–2021 enabled buyers to bid up home values
- Pandemic-driven demand for space boosted competition
- Housing supply remained extremely tight with under 2 months’ supply of homes for sale by late 2022 and 2023
- Indiana experienced net population gains, adding over 31,000 new residents between 2018 and 2022
Household formation indeed surged during this period. Between 2019 and 2022, Indiana gained over 93,000 additional households headed by adults under age 45. This represents the fastest pace of new household formation in decades for the state. Young adults entering their prime homebuying years flooded the housing market, intensifying competition for starter homes.
Who’s Buying? First-Time Buyers vs. Repeat Buyers
Demographics of Hoosier Homebuyers
The profile of Indiana homebuyers shifted from 2018 to 2023. Millennials (roughly ages 27–42 by 2023) made up a huge wave of potential buyers entering the market. However, despite their numbers, first-time buyer participation fell to historic lows by the early 2020s. Nationally, only 26% of home purchases in 2022 were by first-time buyers, the lowest share since tracking began in 1981. By 2023, this figure slipped to just 24%. Indiana likely mirrored this decline, as younger buyers struggled to compete.
Several factors pushed first-timers to the sidelines:
- Rapid price increases and higher down payment requirements priced many out
- In competitive bidding wars, existing homeowners with equity and cash often outcompeted true first-timers
- The median age of first-time buyers nationally jumped into the upper 30s by 2022–2023
At the same time, Baby Boomers emerged as a powerful force among homebuyers. By 2022, Baby Boomers actually surpassed Millennials as the largest generation of homebuyers nationwide. These older buyers often had significant advantages: many were empty-nesters or recent retirees bringing substantial equity or cash from previous homes.
Boomers were also a major presence on the selling side. They made up about 45% of home sellers in recent years, the largest share of any generation. Notably, sellers aged 69–77 were the most likely to downsize – commonly selling a larger family house and buying a smaller, easier-to-manage home.
However, downsizing wasn’t a given. Surveys found that 78% of older homeowners plan to “age in place” (stay in their current homes as they age). Many Indiana boomers chose not to move at all, especially once interest rates spiked. This contributed further to the inventory crunch, as fewer move-up homes were available for younger buyers to purchase.
Migration Trends and Newcomers
Unlike some Sun Belt states, Indiana did not see an extreme flood of out-of-state migrants during the pandemic, but it did benefit from steady inflows of new residents. A portion of buyers in 2020–2023 were people relocating from elsewhere – often from higher-priced markets in Illinois, Ohio, or even coastal states.
These newcomers often had homebuying budgets above local norms (for instance, someone selling a modest suburban home in Chicago might free up more cash than the price of a larger home in Indiana). Indianapolis became a notable target for out-of-state investors and buyers, even ranking as one of the top cities for out-of-state rental property investment.
Urban vs. Rural: Where Are Indiana Buyers Purchasing?
Indiana’s homebuying trends played out differently across urban and rural areas. From 2018–2023, urban markets generally saw the most intense competition and price growth, but rural areas were not left untouched.
Metropolitan Areas
Indianapolis and surrounding counties led the state’s price appreciation. Over the last decade, Indianapolis home values have more than doubled – rising about 130% between 2014 and 2024, one of the highest increases in the nation. Many families earning under $250K found it tough to buy in the most sought-after areas (e.g., Carmel or Fishers, known for top schools), as those areas’ prices often exceeded their budgets.
Budget-conscious buyers in metro Indy increasingly looked to farther-out suburbs or exurban communities where prices were lower. Rather than buying in Hamilton County, some buyers turned to places like Greenwood or Avon, or even more distant towns, to find a home in their price range.
Smaller Cities and College Towns
In smaller cities like Fort Wayne, Evansville, and South Bend, home prices were lower than Indianapolis, yet they too saw strong growth. College towns such as Bloomington presented a unique challenge: by 2023 it was the least affordable large market in Indiana relative to local incomes, with an affordability index of only 66 (far below the threshold of 100).
Rural Areas and Small Towns
Rural areas and small towns across Indiana generally offered the lowest home prices, which was attractive for budget-conscious buyers – if they could find properties. During the pandemic, the shift to remote work allowed a subset of buyers to consider homes in scenic or quiet rural counties that previously would have been impractical.
However, rural buyers faced their own hurdles. Housing in many rural counties is older, and quality inventory can be scarce. Some rural buyers opted for manufactured homes (mobile or modular homes) as a cost-saving option.
By late 2023, every major Indiana metro area had become “unaffordable” by standard metrics for median-income buyers. The Atlanta Fed’s Home Ownership Affordability Monitor showed that in August 2023, a median household could no longer afford the median-priced home in Indianapolis, Fort Wayne, South Bend, Evansville, Lafayette, Elkhart, Terre Haute, or Bloomington. This was a stark change from 2018, when most of those areas were quite affordable.
What Are They Buying? Property Types and Moving Patterns
Despite the heated market, traditional single-family homes remained the top choice for Indiana buyers with under $250K income in 2018–2023. However, as prices climbed and inventory thinned, many buyers had to broaden their expectations on property type, size, or location.
“Starter homes” (often modest 2-3 bedroom houses) were in extremely high demand and short supply. Some budget-conscious buyers therefore turned to condos and townhouses as an alternative. In the Indianapolis area, new townhome developments sprang up downtown and in some suburbs, providing a slightly more affordable option than comparable single-family homes.
One noticeable trend by 2021–2022 was homeowners choosing to “stay put” rather than move. With interest rates locked in at 3% or below on their current mortgages, many homeowners decided against selling and buying another home at a 7% rate. This rate lock-in effect meant people stayed in their homes longer, leading to fewer listings hitting the market.
Vacation and Investment Properties
Some households in the upper end of the under $250K income group ventured into second-home or investment purchases. A number of Hoosiers bought lake cottages or cabins in-state (for example, on Lake Wawasee or in Brown County) or in nearby Michigan, taking advantage of low rates to afford a weekend getaway.
Investment property purchases also spiked, with some regular Indiana families trying their hand at becoming landlords during the boom. With rents rising and interest rates low in 2020–21, a household earning around $120K might buy a second house to use as a rental or an Airbnb.
The Impact of Investors
While our focus is owner-occupants, it’s important to note the huge role investors played in Indiana’s housing market during 2018–2023. In Central Indiana, roughly 1 in 4 home sales went to institutional or corporate investors by 2021. In fact, Indianapolis was reported as the #1 city in the U.S. for out-of-state investment in single-family rental properties around that time.
This investor activity ramped up over the period. In 2012, only about 15% of Indy-area purchases were by investors, but by late 2021 it reached 26% and was on track for 30% in 2022. Investors “gobbled up” starter homes, the very properties that first-time buyers sought, worsening the shortage of entry-level houses.
Not all investors were big corporations; plenty were smaller local investors or individuals. But collectively, investor purchases heavily impacted the market’s supply. Five central Indiana counties even saw nearly half of single-family rentals owned by investment companies as of the early 2020s.
How Homes Were Financed: Mortgages and Down Payments
Loan Types and Down Payments
Through this period, the 30-year fixed-rate mortgage was by far the standard loan product for Hoosier homebuyers. However, low-down-payment programs were crucial for many buyers without substantial savings:
- FHA Loans: These mortgages allow as little as 3.5% down and were popular among first-time buyers, particularly in the earlier years of this period. During the hot market of 2020–2021, some sellers were hesitant to accept FHA offers, but by 2022–2023, with the market cooling slightly, FHA usage ticked back up.
- USDA Rural Development Loans: Given Indiana’s vast rural areas, the USDA 0%-down loan program was a game-changer for many. During 2018–2023, USDA-backed mortgages grew in popularity as buyers priced out of city markets looked farther afield for affordable homes.
- VA Loans: Indiana has a sizable population of veterans and active-duty military. VA loans, which offer zero down payment for eligible veterans/servicemembers, were a steady presence, likely comprising around 5–10% of Indiana home purchase loans in this period.
- Conventional 3-5% Down: Many buyers used conventional mortgages with private mortgage insurance (PMI) allowing down payments well below 20%. These conventional low-down options were popular for those with decent credit who wanted to avoid FHA.
The typical first-time buyer put around 6% to 10% down, while repeat buyers put roughly 15% to 20% down. Indiana has several down payment assistance (DPA) programs administered by IHCDA and local agencies to help first-time buyers; these programs saw strong uptake as buyers scrambled to cover growing down payment requirements.
The Interest Rate Rollercoaster
How buyers financed their homes was heavily influenced by the interest rate environment, which saw wild swings in this period:
- 2018–2019: Mortgage rates were relatively modest, mostly in the 4% to 5% range for a 30-year fixed loan.
- 2020–2021: In response to the pandemic, interest rates plummeted. By late 2020 and into 2021, 30-year mortgage rates hit ~3% or even under 3% for well-qualified borrowers. These were near-record lows and suddenly boosted affordability.
- 2022–2023: The tide turned abruptly. By late 2022, 30-year rates exceeded 7%, the highest in 20+ years. This more than doubled the financing cost compared to a year prior – monthly payments jumped 30–40% higher for the same loan amount versus 2021.
For households on a budget, the affordability challenge in 2022–2023 was acute. By mid-2023, a median-income Hoosier household could only afford ~67% of the cost of a median-priced home, whereas in 2019 they could afford over 100% when rates were low.
The Prevalence of Cash Buyers
One notable aspect of 2020–2022 was the rise of cash buyers. Nationwide, roughly 1 in 4 home purchases in 2021–2022 were all-cash. Several categories of buyers drove the cash trend:
- Out-of-state transplants from expensive markets
- Investors, who frequently paid cash, especially larger firms
- Retirees/downsizers who sold longtime homes and had significant equity
Cash offers put financed buyers (the typical family needing a mortgage) under pressure. Indiana buyers who needed mortgages had to beef up their offers in other ways: getting fully pre-approved, offering above asking price, waiving certain contingencies like repairs, or choosing a conventional loan over FHA/VA to seem more solid.
Comparison to 2008–2017: How Have Things Changed?
The housing market landscape for Indiana’s budget-conscious buyers in 2018–2023 was drastically different from the prior decade (2008–2017):
Market Conditions
The 2008–2011 period began with the housing crash and Great Recession. In Indiana, home prices fell roughly 10% from their 2007 peak to 2011, and foreclosures flooded the market. From about 2012–2017, prices recovered at a modest pace (~3–5% annual growth, on average), a “healthy” appreciation rate without extreme spikes.
Buyers had the upper hand in the early-mid 2010s, with plenty of choices and even seller concessions common. By stark contrast, 2018–2021 saw explosive price gains (often 10%+ yearly) and severe inventory shortages. The balance of power flipped entirely: the earlier era was a buyer’s market (especially 2009–2012), whereas 2018–2023 was a strong seller’s market.
Housing Supply and Demographics
Post-2008, homebuilding in Indiana slowed to a crawl. By the mid-2010s, fewer new homes were being added, but it wasn’t yet a problem because there were leftover homes from the boom sitting vacant. By the early 2020s, it became clear that new construction was not keeping pace with demand, especially for entry-level homes.
The buyer demographics also shifted dramatically. Around 2010, the buyer pool skewed local and younger. Contrast that with 2020–2021: the average buyer might have been a move-up suburban family with substantial equity or an out-of-state transplant with cash. Essentially, the market shifted from a locally-driven one to one influenced by outside capital and older, wealthier buyers.
Financing and Buyer Behavior
The financing environment changed significantly too. The late 2000s housing crash was triggered by loose lending, and in 2008, credit suddenly tightened drastically. By comparison, 2018–2023 saw both extremes: record low rates (sub-3%) followed by a spike to ~7%.
The psychological backdrop couldn’t be more different. In 2008–2012, buyers were skittish and cautious – home values were falling, so there was fear of catching a falling knife. By 2020–2021, buyers were frantic, experiencing FOMO (Fear Of Missing Out) as prices rose monthly. This led to behaviors rarely seen before: bidding wars with tens of thousands over asking, waiving inspections, buying sight-unseen, etc.
Affordability and Homeownership
Around 2015, Indiana’s housing was extremely affordable. By 2023, affordability had eroded dramatically. While Indiana’s homeownership rate still hovered around 72-73%, there was growing concern that young families were being locked out. Current homeowners built substantial equity during 2018–2023, but aspiring homeowners faced new barriers.
Conclusion
For Indiana households earning under $250,000, the 2018–2023 period was a rollercoaster ride in the pursuit of homeownership. They saw home prices soar to new heights, squeezed by limited supply and heightened competition. First-time buyers found it especially challenging, often deferred in favor of older or more cash-rich buyers.
Across Indiana’s cities and countryside, buyers adapted by shifting where and what they bought – from moving farther out to considering smaller or attached homes. Financing also adapted with creative solutions and a heavy reliance on low-down-payment loans until the interest rate spike tested everyone’s budgets.
Looking ahead, Indiana’s focus is now on improving housing affordability and supply. State leaders recognize the need to boost home construction (particularly entry-level homes), expand down payment assistance, and ensure that homeownership remains attainable for the middle class. The 2018–2023 homebuying frenzy may be cooling, but its effects – from higher baseline prices to changed buyer expectations – will persist.
References
- Indiana housing market outlook for 2024 – Indiana Business Research Center
- Supply-side outlook – Indiana Housing & Community Development Authority
- Homeownership Rate for Indiana – U.S. Census Bureau
- How investors are buying homes in Indiana and driving up prices – Greater Indianapolis Multifaith Alliance
- First-Time Home Buyers Shrink to Historic Low of 24% as Buyer Age Hits Record High – National Association of REALTORS®
- Cities With the Largest Increase in Home Prices Over the Last Decade – Construction Coverage
- The State of Indiana’s Housing Market – Indiana Business Review
- Idaho Homebuying Trends (2018–2023) For Households Earning Under $250K – Home Stratosphere
- Vacation Home Counties – National Association of REALTORS®
- Investors own half of rental homes in five Central Indiana counties – Yahoo News
