INDIANAPOLIS (WISH) — Interest rate hikes have curbed demand for houses in Indiana, but that business may be rebounding with the new year.
“The buyers are coming back. I think there was just kind of a ‘whoa’ sense there for a minute,” said Joel Clausen with Scott Smith Realty Group.
Clausen said home sales slow in winter, and the interest rate hikes intensified that slowdown.
Clausen said a lot of the buying frenzy cooled toward the end of 2022, but buyers are once again asking for inspections and their closing costs to be covered, which was something many could not do as the coronavirus pandemic first took hold of the housing market.
“People kind of back off around Christmas, New Year’s Eve, those kind of things. We start to see it around Thanksgiving. It cools off quite literally and figuratively, but they come back after the new year, and I am starting to see that right now,” Clausen said. “But, I also think when you’re talking about interest rates it’s kind of the sticker shock. We’ve been in the high 2s and the low 3s for a long time.”
The 0.25% interest rate hike announced Wednesday was less than the 0.5% and 0.34% jumps in 2022.
Jerome Powell, chair of the Federal Reserve, said more hikes are likely coming to reduce inflation.
Doug McCoy, director of real estate for the IU Center for Real Estate Studies and a finance professor, told News 8, “They’re backing off, so they’re making progress in slowing inflation, so that means they can go to smaller increases as they are seeing this progress.”
McCoy said Indiana is experiencing a housing shortage. “Land costs are high, construction costs are high, labor is high, and, with these interest rates going up, it’s slowing the production of new homes even more because they know the demand isn’t there for these new homes for these higher interest rates.”
These experts said having interest rates under 7% for homes is reasonable; four decades ago, rates could be in the high teens depending on when the home was purchased.