For years, buying a first home in Indiana felt like a race with no finish line. Prices soared, listings vanished overnight, and interest rates swung wildly. First-time buyers, who once made up a steady third of the market, started vanishing too. By 2022, their share dropped to the lowest point in over four decades. The typical first-timer was no longer a 20-something just starting out, but a 36-year-old navigating a punishing market. Then in 2023, something shifted. As the chaos cooled, more newcomers found a foothold—just not as many as before.
Supply and Demand Imbalance
Shrinking Inventory
One defining trend from 2018 to 2023 was high demand outpacing housing supply in Indiana. Inventory levels steadily declined through the late 2010s, creating a competitive market. By the early 2020s, Indiana had less than a month’s supply of homes for sale in some periods – far below the six months considered a balanced market.
Disappearing Starter Homes
Entry-level houses became hard to find. Affordable “starter homes” priced around $150,000 virtually disappeared in many areas. A house selling for $160,000 in 2017 might sell for over $240,000 by 2023 – a 50% jump in just six years. From 2021 to 2022 alone, listings under $150,000 statewide dropped by 7,267 units.
Growing Demand
Overall buyer demand remained strong. Indiana’s population growth meant younger adults were forming new households. Between 2019 and 2022, the state saw an increase of over 93,000 households headed by people under age 45.
This surge of young households collided with limited supply, creating intense competition, rapidly rising prices, and an environment where sellers held the advantage. This climate hit first-time buyers the hardest, since they lack existing home equity and often have tighter budgets.
Pandemic Impact on Housing
The COVID-19 pandemic in 2020 marked a turning point for homebuying trends. Initially, real estate activity slowed due to lockdowns and uncertainty. But soon after, the housing market roared to life.
Several factors boosted demand: record-low mortgage rates (below 3%), desire for more space during lockdowns, and increased savings for some households. For first-time buyers with stable jobs, this created an opportunity to buy with cheap financing.
Price Surge
However, pandemic-era conditions were a double-edged sword. While loans were inexpensive, prices skyrocketed. In Indiana, house prices jumped an unprecedented 17.5% year-over-year by mid-2021.
Bidding wars became common, and cash offers from investors or move-up buyers often beat out financed offers. Affordability worsened: by 2022, homeownership was considered unaffordable for median-income families in several Indiana cities.
Competitive Disadvantage
The competitive market favored those with more resources. Many first-time buyers needed larger down payments or family help to win a bid. Nationwide, the typical down payment for first-timers reached 8% in 2022 – the highest in decades.
Some buyers waived inspections or paid above appraised value. These tactics were difficult for first-timers with limited savings. By late 2022, first-timers represented only one-quarter of buyers (26%), down from one-third a year before.
Rising Interest Rates
In 2022, mortgage interest rates spiked above 6% – further squeezing budgets and forcing some buyers out of the market. By 2023, rates exceeded 7%, drastically reducing purchasing power compared to the 3% rates of 2020-2021.
First-Time Buyer Demographics
Age Trends
A decade ago, the typical first-time buyer in the U.S. was in their early 30s. In Indiana, as of 2019 the median age was around 33 years for first-time buyers. By 2022–2023, this age climbed significantly to 36 years old.
This trend reflects people waiting longer to buy their first house. Many millennials rented into their 30s and only purchased when they had higher incomes or when remote work allowed moving to affordable areas.
Household Composition
Many first-time buyers are young couples or individuals just starting their households. Nationally, 59% of recent home buyers were married couples – a declining share, meaning more singles are buying homes than before.
A substantial number of first-time buyers are married without children or have very young kids. Only about 30% of all buyers in 2023 had children under 18 in the home (the lowest share recorded). Household size for first-time buyers is often two people on average.
Income Requirements
Perhaps the biggest change has been the income needed to buy. In 2018–2019, the median household income of Indiana first-time buyers was likely around $60,000–$70,000.
By 2022, only higher-income households could afford the jump in prices. Nationally, the median income of first-time buyers soared to about $95,900 in 2022, up 35% from $71,000 just one year earlier.
Even in a relatively affordable state like Indiana, home prices rose faster than wages. By 2023, first-time buyers tended to be in the upper income brackets for the state – they often had professional jobs or dual incomes that gave them the purchasing power needed in today’s market.
Racial Disparities
The majority of first-time homebuyers in Indiana are White, reflecting the state’s demographics and homeownership disparities. Nationally in 2022, 88% of home buyers were White, and only 3% were Black and 8% Hispanic.
One Indiana study noted that overall homeownership held steady over the past decade but declined among Black Hoosiers, even as it rose for other groups. This indicates fewer first-time buyers from Black communities.
What Properties Are First-Time Buyers Purchasing?
Housing Preferences
Traditionally, first-time buyers purchase modestly sized, affordable homes – often called “starter homes.” From 2018–2023, several patterns emerged:
Single-family houses dominate the market. In Indiana, the vast majority of first-time buyers opt for detached single-family homes. About 85% of first-time buyers purchase a single-family home. A small share buy condominiums or townhomes, usually in urban centers like downtown Indianapolis or college towns.
Size and Space
First-time buyers generally buy smaller homes than repeat buyers. The median home size for first-time buyers is around 1,600–1,700 square feet, typically with 3 bedrooms and 1½ or 2 bathrooms.
However, a recent trend shows some first-time buyers are “skipping” the starter home and buying bigger houses from the start. Because people are buying later in life, they may have higher incomes or children, so they choose a larger house than a traditional starter.
New vs. Existing Homes
First-time buyers in Indiana often purchase older existing homes rather than brand-new construction. New construction tends to be priced higher and geared toward move-up buyers.
Builders in recent years have focused on larger, high-end houses, making it tough to find newly built starter homes. As a result, many young buyers buy older homes and then invest sweat equity in renovations.
When mortgage rates were extremely low in 2020–2021, some first-timers stretched their budgets for new homes in the suburbs. But with rising rates, interest has swung back to older, cheaper homes.
Regional Variations Across Indiana
Indianapolis Metro
The Indianapolis area has the largest number of first-time buyers simply due to population. Indy’s strong job market in tech, education, and healthcare attracted many young professionals seeking homes.
Home prices in Indy rose quickly during 2018–2023, but remained moderate compared to national averages (the median Indy sale price was roughly $250,000 in 2022). Suburban counties like Hamilton, Hendricks, and Johnson saw lots of new home construction, but much was above entry-level prices.
Within Indianapolis, older neighborhoods provided some relatively affordable options for first-timers. The distance moved by buyers nationwide jumped in recent years (median of 50 miles in 2022 vs 15 miles before), indicating some Indianapolis first-timers may have moved farther to find affordable homes.
College Towns
College towns present a mixed picture. They have a constant influx of young educated people who could become first-time buyers. However, home prices in these towns can be high relative to local incomes.
Bloomington saw one of the highest rent and price increases in 2022. First-time buyers there face competition from student rental investors. West Lafayette/Lafayette similarly had fast price growth and affordability issues. Muncie remained more affordable, so local first-timers had better luck there.
Mid-sized Cities
Indiana’s mid-sized cities often offer more affordable housing than Indianapolis or college towns. Fort Wayne and Evansville historically have lower median prices, often under the state median.
These cities likely saw a healthy number of first-time buyers taking advantage of that affordability. During 2020–2021, Fort Wayne’s housing market was hot but still within reach for many first-timers (median prices in the low $200s).
Rural Areas and Small Towns
Indiana’s rural counties typically have very affordable real estate, but also lower incomes. One trend in 2020–2022 was migration to small towns as remote work became possible.
In rural Indiana, entry-level homes are more plentiful but may require renovation. First-time buyers in these areas might buy a fixer-upper farmhouse or a small house for under $100,000. Programs like USDA rural development loans have helped rural first-timers with low down payments.
Comparing 2018-2023 to the Previous Decade
The 2008-2017 period differed significantly from the recent 2018-2023 era:
Market Share Differences
In the late 2000s, first-time buyers actually gained ground. During the Great Recession, home prices fell and the federal government introduced a First-Time Homebuyer Tax Credit in 2009–2010.
This led to a record surge in first-time purchases. In 2009, first-time buyers made up about 47% of home sales, and in 2010 they hit about 50% – the highest on record.
From 2018–2023 the first-time buyer share never approached those levels. It mostly ranged in the low-30% range and then dipped to 26% in 2022.
Affordability Contrast
The 2008–2012 period was marked by falling or flat home prices in Indiana. Many homes were foreclosed or selling cheaply, which was advantageous for first-time buyers. Affordability was relatively high for first-time buyers around 2010.
By 2021–2023, affordability reached historic lows. In Indiana, the median home value in 2010 was much lower (perhaps around $120,000) compared to about $200,000+ in 2023.
Credit Environment
After the housing crash, lenders tightened standards significantly around 2009–2015. By the late 2010s, credit availability had normalized somewhat.
Interest rates were actually similar or lower in the recent period until 2022. The big divergence came when rates spiked above 7% in late 2022, which had not been seen since about 2001.
Buyer Behavior Changes
First-time buyers a decade ago were generally younger and often bought starter homes intending to trade up later. Today’s first-timers are older and sometimes skip the starter step.
The average tenure in a home has lengthened. In 2012, a first-time buyer might have expected to live in their home ~10 years; now many expect to stay much longer (the median expected tenure rose to 18 years in 2022).
Market Conditions
The late 2000s were a buyer’s market – high inventory, low prices, incentives. First-timers could often negotiate deals and had plenty of homes to choose from.
In contrast, 2018–2023 (especially 2020–2022) was a seller’s market – very low inventory, multiple offers, and buyers had little bargaining power. In 2011, an Indiana first-time buyer might have had their closing costs paid by the seller as an incentive. In 2021, a first-time buyer likely had to pay above listing price and waive contingencies.
Conclusion and Future Outlook
From 2018 through 2023, first-time homebuyers in Indiana experienced a rollercoaster ride. They started in a relatively steady market, rode through an unprecedented pandemic housing boom, and ended up in a high-cost, high-rate environment.
The “typical” first-time buyer became older, wealthier, and fewer in number, as the hurdles to homeownership rose. Many had to adjust their expectations – whether that meant moving farther out, buying a smaller/older home, or delaying purchase until they saved more.
By late 2023, there were signs of slight improvement. As the frenzy calmed, some inventory opened up and competition eased. Programs from the government and state (like down payment assistance through the Indiana Housing & Community Development Authority) continue to support first-time buyers.
Indiana remains more affordable than many states – the median home price (around $250,000 in 2023) is well below the U.S. median. This relative affordability could attract first-time buyers from pricier regions and give local renters hope.
Looking ahead, the key factors will be affordability and supply. If mortgage rates settle down and more houses are built (including smaller homes for entry-level buyers), Indiana’s first-time buyer market could revive to more normal levels.
The desire for homeownership remains strong – surveys show younger adults still want to buy homes for stability and wealth-building. Indiana’s population of 25–34 year-olds is projected to grow, meaning a fresh wave of potential first-time buyers. The big question is whether the housing market will have enough accessible, affordable homes to meet that demand.
References
- Kansas City Regional Assoc. of Realtors. NAR Finds Share of First-Time Home Buyers Smaller, Older Than Ever Before
- National Association of Realtors. Highlights From the Profile of Home Buyers and Sellers (2023)
- National Mortgage News. First-time home buyer income hits record high
