Mike and Elaine Morgan never envisioned moving from Butler Tarkington to a home just outside Sheridan, but that's where today's fast-paced housing market took them.
After watching property values skyrocket, they listed their Indianapolis home with the notion of moving to a suburb with a better school district. They were thrilled when their house sold in five days, but quickly discovered finding a new home wouldn't be easy or cheap.
Their search for an affordable home with a bit of land took them all the way to rural Boone County.
"I would have loved to go to Zionsville or Carmel, but the prices are astronomical," Mike Morgan said. "But we love it here. We have land to do everything we want, and the high school and elementary school have great ratings."
Central Indiana's housing market is booming in a fashion previously unseen by real estate agents, leading to historic median prices. It's continuing a trend that began two years ago due to stifled demand after the recession, low interest rates and a loosening of lending standards. The market is strong everywhere, but especially hot throughout Hamilton County, the suburbs and in up-and-coming neighborhoods near Downtown Indianapolis.
But there's a hitch. The market can't keep up with the demand. Listings are down, creating frenzied bidding wars that see homes selling within days, if not hours, of hitting the market, often for inflated prices.
Looking for relief, real estate firms are launching marketing campaigns to convince homeowners its time to sell, even cold-calling potential customers to let them know their home values may be at an all-time high.
Builders have noticed too, flooding local planning boards with proposals for new subdivisions in the suburbs. In Indianapolis, prospectors are flipping run-down houses and building homes on vacant lots as quickly as they can, especially in and near Downtown.
"There is a lot of pent-up demand," said Donna Kreps, president of FC Tucker's residential division, "and buyers who are eager to take advantage of historically low interest rates. There would be more sales going on if there were more listings available."
Hamilton County continues to lead the market
Hamilton County remains the area's most robust market and among the most desirable places to move, leading to record prices.
First-quarter closings were up 2.4 percent to 1,258 homes sold. Listings, though, were down 3.5 percent to 1,962 houses on the market, according to MIBOR Realtor Association. That means sellers have the advantage, pushing median sales prices up 12.6 percent to $250,000. Just a decade ago, the median home price was roughly $200,000.
Sellers could expect to receive an unheard of 96.3 percent of their original asking price, highest in the metro area. Brokers are desperate to get more homes on the market due to suppressed demand. The county only has a 2.9-month supply of homes listed for sale, half what most realtors consider a balanced market of 6 months. The lack of supply is driving up prices.
Jimmy Dulin, a broker with Remax Ability Plus, said the lack of homes to sell has been a challenge. When houses hit the market, bidding wars break out, driving up prices.
Want to buy? Dulin said you'd better have your financing in order and be ready to move quickly. He said serious buyers are even selling their homes and renting while they look for a new house, ready to strike fast with financing in place. He said buyers who make offers contingent on selling their own homes are having an increasingly difficult time competing against bidders who can close now.
And, he said, be prepared to come in high.
"It used to be you could look at a home listed for $300,000, write an offer for full asking price and feel pretty certain you'd get the home," he said. "That's not the case anymore because someone else wrote an offer for $305,000, and you just lost."
He said anything priced accurately under $500,000 is selling as soon as it hits the market. Even homes over $1 million, which historically take longer to sell, are moving.
"There is not a stagnant price point," he said.
Carmel is especially difficult to buy in to, especially for a middle-income families. Of the 99 homes listed that are less than $250,000, 50 are pending sales. Of the 268 homes listed from $250,000 to $500,000, 154 are pending sales. Even the luxury market is moving. Eight of the 38 homes listed at more than $1 million have sales pending.
"Forget about anything under $150,000 in Carmel," Dulin said. "It doesn't exist."
Like the Morgans, prospective home buyers have been pushing north into rural parts of Boone and Hamilton counties, and even into Anderson.
Mike and Elaine Morgan, both 30, never imagined they would move from their ranch near the Butler campus to rural Sheridan. The couple have a 9-month old daughter, and they planned to move to a community with a strong school district before she reached kindergarten. But they figured they had years to look around.
When they saw how fast neighboring houses were selling, though, they decided to test the market. Just 18 months ago, their 1,600-square-foot ranch appraised for $160,000. Once listed, it sold for $210,000.
"I don't know that that neighborhood will ever be as hot as it is now," Mike Morgan said.
The couple quickly realized, though, they were going to have to move farther north than they planned due to lack of availability and high prices in southern Boone and Hamilton counties. They finally bought a ranch, about the same size as their Indianapolis home, for $278,000 on 10 acres in northern Boone County.
They weren't familiar with Sheridan Community Schools, which includes townships in northern Boone and Hamilton counties, but liked what they saw after a little research and pulled the trigger.
"We saw a relatively similar property in Zionsville listed for close to $1 million," he said. "We put in an offer on this house the second day it was on the market, and we got it."
The rest of the suburban market has been strong too. Median sales prices are up 7.1 percent for the 13-county region tracked by MIBOR in the first quarter, to $152,000. Closed sales are up 8.7 percent, to 6,712 homes sold in the first quarter.
The region as a whole has bottled-up demand, with only enough homes on the market in March to last 2.9 months, down from 3.8 months a year ago.
First-quarter sales rose 35.7 percent in Shelby County, 26.3 percent in Boone County, 22.9 percent in Hendricks County, 9.2 percent in Morgan County, 7.3 percent in Hancock County and 3.2 percent in Johnson County.
After Hamilton County, sellers got the highest return on their homes in Hancock and Hendricks counties. Median prices rose 11.3 percent to $161,000 in Hancock County and 11.1 percent to $177,750 in Hendricks County.
Builders have been rushing to meet demand.
In the nine-county region tracked by the Builders Association of Greater Indianapolis, builders filed for 5,778 permits to build homes in 2016, up 13 percent from 2015. That's the highest amount since the housing boom of the early 2000s, when builders filed for 13,000 permits a year.
Hamilton County led the way with 237 permits in March, up 10 percent year over year.
Scott Mairn, Pulte's division president, said the sweet spot has been homes in the $300,000 to $400,000 range. While he said there is a market for less expensive homes, increasingly stringent architectural standards from local cities are driving up home prices. New homes for less than $300,000 have become less common and less than $200,000 almost unheard of in the most affluent suburbs.
Neighbors often protest new developments, leading cities to require architectural and community standards that significantly drive up the price. Westfield just turned down a proposal by Pulte to build homes averaging $510,000 around a golf course, with neighbors criticizing the proposal because homes were not all brick and too many would have front-loading garages.
Pulte has 24 active subdivisions, mostly in Hamilton County, but some stretch into Hendricks and Boone counties. He said Westfield, Avon, Plainfield, Brownsburg, Zionsville and Whitestown have been particularly strong markets.
"The industry is stable but not overly crazy," Mairn said. "I don't think we'll see 13,000 permits annually again, at least in the short term, but we'll continue to see healthy, moderate growth."
Downtown drives Marion County
Driven by strong growth in neighborhoods near Downtown, the resurgence of a once lukewarm housing market has continued in Marion County.
Sales are up 8.9 percent in the county in the first quarter, to 2,860 homes sold. The median sales price is up 6.4 percent, to $125,000, still lower than all of the doughnut counties but Shelby. Listings have remained steady in a seller's market at 4,070.
As in the suburbs, demand is outpacing availability. Sellers are getting 93.6 percent of their original asking price, and the supply of homes is at 2.8 months. New building, much of it on vacant lots near Downtown, is doing little to slacken demand. This quarter, 222 permits have been issued, up 6 percent year over year.
After seeing how quickly homes were selling, Shawnta McDonald, 33, decided to list her 2,200-square-foot home in Mapleton Fall Creek for $189,900. It sold the first day for $195,000.
She's renting an apartment before moving to be closer to her parents in Arizona next year.
"I wanted to go ahead and put it on the market now since I didn't know what the market will be like next year," she said.
Remax Ability Plus agent Christie Snapp said the market is robust throughout the county, but anything near Downtown is blowing up. She said investors are flipping lots, stretching the boundaries of up-and-coming areas.
The sweet spot is in the $250,000 to $350,000 range, but her business partner, Sarah Beth Skidmore, has been successfully showing homes in the $600,000s.
Unlike the suburbs, a lot of the homes in Marion County are remodels. Snapp said. Even in this market, buyers are demanding updated kitchens and bathrooms with new appliances and higher-end features such as backsplashes, quartz or granite countertops and walk-in showers with double shower heads.
As in the suburbs, buyers are coming in above the asking price to avoid bidding wars. Sometimes, houses fail to appraise for a home's negotiated price. In those cases, buyers often bring cash to the table. Snapp said the majority of buyers have had no trouble qualifying for loans.
How long will the market stay so robust?
"That's a good question," she said. "I hope it's a hot market for a while. I also hope a lot more people start listing their homes."
