Interest rates have been ticking up over the past couple of years, but they haven’t reached the point where there’s been a slowdown in the residential real estate market.
According to the latest figures from the Indiana Association of Realtors, home sales and prices continued to rise throughout the state and the region in August, remaining on track to exceed the strong figures posted in 2017.
Across the state, closings rose 7 percent in August compared to the same month last year, and the median price of those homes — an equal number of sales on both ends of the figure — increased 7.3 percent to $160,500 from last year.
A similar story played out here in August with the median price of sold homes increasing 12.6 percent to $142,050 in St. Joseph County, 5 percent to $162,800 in Elkhart County and 4.3 percent to $140,75 in Marshall County and sellers generally receiving 95 percent to 98 percent of their asking price.
That’s because the supply of residential property — houses, condos, villas and such — remains low and consumers remain optimistic with the non-seasonally adjusted unemployment rate at 3.7 percent across the state in August.
In other words, demand still exceeds supply.
“Realtors don’t expect conditions to change until the pace of new construction picks up or employment and wages start to slide,” said John De Souza, president of locally based Cressy & Everett Real Estate and president of the Indiana Association of Realtors.
The problem with new construction is that most of it is concentrated in the market north of $250,000, said De Souza, adding that home builders say it’s difficult to make a profit below that range because of the higher costs for labor, materials and even land.
Others say that there just seem to be fewer home builders since the Michiana region was decimated by the Great Recession about a decade ago.
“The lack of inventory has been the theme for the past one and a half to two years,” agreed Beau Dunfee, managing broker with South Bend-based Weichert Realtors — Jim Dunfee & Associates.
“The biggest shortage is for homes priced below at about $200,000 or below,” Dunfee said, adding that some new housing in that range would go a long way toward easing the demand-supply imbalance here and across the state.
Breaking that imbalance with some additional construction would be huge because there are some potential sellers who don’t even want to list their homes for sale unless they can see a viable option that fits their needs, De Souza explained.
No one believes mortgage rates — still low by historical standards — have reached the point where they might slow down the market, though some buyers might eventually be forced to amend their expectations. Conversely, some buyers feel more motivated than ever to make a buying decision, thinking they should act now rather than being forced to make a lesser purchase should rates continue to go up.
Until rates hit a point that causes a slowdown or the economy starts to falter, no one can see an immediate end to the strong real estate market, especially one that continues to favor the seller.
“Things have cooled off a little since spring and summer, but there are still more buyers than sellers,” said Roger Pendl, a sales associate with Cressy & Everett Real Estate. “If a home is priced right, it’s going to sell quickly.”