Overall, the Indianapolis real estate market may be looking up because the decline in home sales is beginning to decrease. However, the average owner whose home is not in distress is having difficulty maintaining market values in Indiana due to the foreclosure impact.
Several factors have caused this negative effect on market values including a struggling United States economy, the infamous subprime mortgage debaucle and the loss of job opportunities. Running into the problem of facing foreclosure is reaching those who have never previously even been late on a mortgage payment.
How is Indianapolis and its surrounding areas doing in comparison? Recently the Indianapolis Star examined over 8,000 home sales from Marion County from the beginning of 2008 to June, 2009 for the foreclosure impact. A staggering 47% of home sales for that duration were determined to be properties in distress, or in other words, foreclosures or sherrif’s sales properties. This is a similar statistic as the rest of the country.
Because the Star only figured in the sales of those distressed properties where they could confirm the lawyer was listing for the mortgage company, these statistics are considered to be conservative.
Concern runs high about this high number of distressed properties because of their ability to lower the market values of surrounding homes. Opinions reflect that homes in distress can lessen the resale of a the home itself by 15-20% and nationwide has reflected a 24% decrease in the average home sales price from better times in mid-2006.
One of the hardest hit areas of those Indianapolis homes for sale has been in Lawrence Township. An alarming 75% of sold homes, from 56th Street to 46th Street and Shadeland to Emerson Avenues are homes in a distressed state.
Up against a home that is being sold for less than market value in some cases, homeowners there are having a very difficult time maintaining equity.
For the rest of Marion County, the distressed market is made up mostly by foreclosures. The year prior to June recorded that 30% of the homes closed by REALTORS® were foreclosures. Likely, the percentage is even higher because this information does not allow for sherrif’s sales or transactions made outside the BLC.
In contrast, when the Star surveyed the Indianapolis suburb for the same period of time, it found that approximately 30% of its home sales were distressed properties as well.
The least impacted counties where Hamilton and Boone where distressed properties made up 17% of sales. Johnson and Hancock counties fared worse than the eight-county average at about 37% of its properties sold being in distress. Not surprisingly, the lower the income average of a particular area, the more distressed home sales were found.
While none of these statistics have the appearance of good news, the national average of distressed sales appears to be dropping, as it does for the Indianapolis area. And while this is positive news, industry experts are predicting it may be as many as five years for the high numbers of properties affected by the subprime mortgage trouble to level out. Unfortunately, the most impacted seller right now will likely be those who, although they’ve never had to miss a payment, have recently lost their job and have to move. The driving down of property values in distress will cause these buyers to not see the return on their investment that they expected.
Where there’s good news is for today’s buyer who can make lemonade out of these lemons and buy in cheap during this foreclosure impact on our society. During these next projected five years, they will be the winners in this undesirable situation.