The state of Indiana's housing market.

• Author: Kinghorn, Matt

Five years after the bottom fell out of the Indiana housing market, there are finally some signs of a recovery.

In 2011, the number of houses sold in Indiana increased for the first time since 2006 and the median sales price climbed for the second consecutive year. The state's foreclosure rate is still far too high, but the number of homes in the later stages of mortgage delinquency has declined of late.

Of course, a recovering patient is not necessarily a healthy one. The modest improvements in some housing market indicators spring from very weak positions. Existing home sales in Indiana, for instance, are still more than 30 percent off the 2006 peak and the share of mortgages that are 90 or more days overdue is only about half-way back to the state's pre-crash level. Meanwhile, residential construction--another key facet of the housing market and the economy in general--has fallen to levels last seen in the early 1980s and seems stuck there.

So where does the Indiana housing market stand? This article examines some of the latest data to try to answer that question.

Housing Demand on the Rise

After slipping for four straight years, Indiana finally saw an uptick in existing home sales in 2011. Spurred by historically low mortgage interest rates and modest improvements in the economy, sales in 2011 increased by 0.4 percent over the previous year.

Existing home sales in the state had declined by an average rate of 9.5 percent per year between 2006 and 2010. The improved pace of sales is even more encouraging when one remembers that 2011 marked the first year since 2008 that the market stood on its own without government incentives designed to boost sales.

The homebuyer tax credits of 2009 and 2010 almost certainly pulled-forward some home sales that otherwise would have occurred in 2011.

As Figure 1 illustrates, sales surged to beat the tax credit deadlines in the fourth quarter of 2009 and the second quarter of 2010 but then declined sharply afterward. Because of this distorted pattern, sales were down year-over-year in the first half of 2011 but then increased in the second half of the year. The rebound appears to be picking up steam in early 2012. Data from the Indiana Association of Realtors shows that sales in the first quarter of 2012 are up 15 percent over the same period a year ago and are the highest first quarter total since 2008. The extremely mild weather conditions this past winter likely helped to boost demand during what is typically the slow season for home sales. Housing market activity over the spring and summer should tell whether a true rebound is underway.

[FIGURE 1 OMITTED]

With the exception of the Michigan City-La Porte area, each of Indiana's metro areas had an increase in home sales over the 12-month period ending in March 2012 (see Figure 2). The Columbus area led the way with an 11 percent increase in sales when compared to the same period a year earlier. With a 7.9 percent increase, the Indiana portion of the Louisville metro had the second-largest uptick in sales followed by the Indianapolis Carmel area (7.3 percent), South Bend-Mishawaka (5.9 percent) and Fort Wayne (5.4 percent). The 45 Indiana counties that are outside of metro areas combined to post a 2.4 percent increase in sales. Statewide, sales are up 4.7 percent over this period.

[FIGURE 2 OMITTED]

House Prices Find Their Footing

After declining each year between 2005 and 2009, the median sales price of homes sold in Indiana continues to rebound as well. At $112,900, last year's median sales price was a 0.8 percent improvement over 2010 and 2.6 percent above 2009. As with housing demand, price gains continued into the early months of this year as the median price in the first quarter of 2012 improved 3 percent...