Falling Mortgage Rates Drive Uptick in Indiana’s August Pending Sales

Indiana’s real estate market saw some interesting shifts in August, particularly as mortgage rates began to decline throughout the month. Despite a slow start, a notable drop in rates and increased inventory helped revitalize buyer interest, leading to more positive momentum by month’s end.

Closed Sales Slow Despite Increased Inventory

In August, closed home sales dropped by 6% compared to 2023, with 7,060 homes sold statewide. This slowdown was likely due to the cautious attitudes of homebuyers in July, with many holding off on purchases amid fluctuating financial conditions. Only a few Indiana metro areas saw improvements in sales compared to last year, with Louisville, Michigan City/LaPorte, South Bend, and Cincinnati showing positive gains.

Despite the drop in closed sales, there was a notable increase in available inventory. On an average day in August, 13,910 homes were listed across Indiana, marking a 28% increase over the previous year and the highest level of inventory since January 2020.

Pending Sales See Growth as Mortgage Rates Decline

As August progressed, declining mortgage rates played a key role in driving up buyer interest. According to Freddie Mac, rates dropped from 6.75% to 6.3%, making home purchases more affordable. This drop in rates led to a 6% increase in pending sales from July, with 7,401 properties under contract. This figure was 7% higher than pending sales in August 2023, suggesting that buyers were quick to seize the opportunity created by lower borrowing costs.

The increase in pending sales was most notable among homes priced below $250,000, which saw a 9% rise in contracts. This shift highlights how lower mortgage rates provided a financial advantage for buyers with more moderate budgets, enabling them to move forward with their home purchase plans.

Median Sale Prices Hold Steady

While sales activity shifted, the median home sale price in Indiana remained stable at $265,000, unchanged from July. However, this represents a 4% increase from the previous year. Homes sold for an average of 96.4% of the original listing price, slightly lower than the 97.1% seen in August 2023.

Homes Staying on the Market Longer

One trend to watch is the increase in days on market. In August, homes were typically on the market for 13 days, compared to 10 days in July and 9 days in August 2023. This longer time on the market could indicate that buyers are taking their time, possibly due to increased inventory or cautious decision-making.

Looking Ahead: A Changing Market Environment

As mortgage rates continue to fall, many buyers who were previously waiting may start entering the market, thanks to improved affordability. This increased demand could create more competition, particularly for move-in-ready homes. Additionally, with more homes available, buyers may consider properties that need updating, potentially leading to more renovation loans being used. While inventory remains strong, the market is expected to become more competitive in the coming months.