Monthly Market Trends April

To provide another useful blog, we are taking a deeper dive in another one of our key markets on our platform, Indianapolis, to provide you with even more comprehensive insight. 

Indianapolis, the Circle City, midwestern to its core with a thriving job market. The city's real estate market is highly attractive, ranked as high as 4th by Realtor.com in 2022 largely because of a steady supply of cash-flowing properties and ample opportunities for expansion. Groundfloor borrowers have taken note of this market and over the past couple years the Indianapolis-Carmel Metropolitan Statistical Area (MSA) has positioned itself as the third most active MSA with 81 active loans totaling more than $11m in loan volume.

So let’s dive in!

We know sound employment opportunities across a diverse set of industries is the cornerstone of a healthy real estate market.  Indianapolis gets high marks in this regard with six major industries as diverse as - Information Technology, Agribusiness, and even the NCAA. I can imagine the offices of the NCAA are quite alive as March Madness unfolds!    

Here are some general residential real estate characteristics for Indianapolis, IN:

• Affordability: Compared to many other major cities in the US, Indianapolis offers relatively affordable housing prices. The median home value in Indianapolis is around $216,000, which is well below the national average of $467,000.
• Diverse Housing Stock: Indianapolis offers a wide variety of housing options, from historic homes and bungalows to modern apartments and condos. There are many different neighborhoods with their own unique characteristics and styles of homes.
• Growing Market: Over the past few years, the Indianapolis real estate market has experienced steady growth. This growth is due in part to a strong local economy and low unemployment rate. Indianapolis has an unemployment rate of 3.1%, which is lower than the long term average of 5.12%
• Strong Rental Market: Indianapolis has a robust rental market, with a significant percentage of residents renting their homes. This has created opportunities for investors and property owners, particularly in areas with high demand for rental properties. Many of our borrowers aim to fix properties up and rent them out, which is one of our most popular exit strategies. This is one reason why this city aligns so well with Groundfloor Borrowers.  
• Opportunities For Buyers: The Indianapolis market provides steady housing opportunity for both owner occupancy and investment that is affordable. 

Demand maintains an advantage over supply in the Metropolitan Statistical Areas (MSA) as a whole.  That makes a strong seller’s market. It’s the first gauge in how a real estate market is faring. Altos Research notes: “This week the median list price for the Indianapolis-Carmel, IN is $350,000 with the Market Action Index (MAI) hovering around 48.  This is an increase over last month’s MAI of 44.  Inventory has held steady at or around 2,584 listings.  

Given the Seller’s Market we assume inventory is flat or sagging as sellers continue to hold onto the properties and buyers are faced with limited choice. This is a good base for overall home prices, but additional inventory will be needed. Given the economic overhangs as investors we appreciate the stability. Since late fall of 2022, inventory levels have been consistently declining in the markets where the majority of our loan portfolio is comprised. Here is a graph of Indianapolis, IN inventory showing the same pattern:

For a more detailed review, I wanted to take a closer look at the five most populated zip codes and see the metrics of each to understand on a more granular level what comprises the data we just reviewed.  Here is a table of the most populated zip codes:

The MAI values indicate the strength of the real estate market in each zip  code, with values above 30 indicating a seller's market and values below 30 indicating a buyer's market. A value of 30 represents a balanced market.

The MAI values indicate the strength of the real estate market in each zip code, with values above 30 indicating a seller's market and values below 30 indicating a buyer's market. A value of 30 represents a balanced market.

According to the table, all of the zip codes are in a Seller’s market with the high score from zip code 46226 at 58.  Buyer demand is more than inventory is supplying, so this suggests that sellers have negotiating power in these zip codes.

Another of our favorite metrics to review is the number of price decreases of current listings. In general, we want to see this number flat or trending down.   

In the Market Profile of this MSA we note price decreases in 37% of listings, we note the sparkline which is trending down.  So in line with the inventory story we saw above and the noted advantage sellers have as shown by the market action support this declining % of active listings with price decreases and it makes sense.  And, again, a signal of price stability.  

Moving through the profile the Median Days on Market is trending down at 42 days, and even with the Average Days on Market at 90, depending on which statistical measure you prefer, the DOM is in line, and moving in a seller positive direction.

Rents are holding constant. The sparkline is somewhat spikey, showing a steep rise then a decline, but the amount of the average rent of $1650 against the median home value of just above $200k, sheds some light on why investors are drawn to this market.  

Indy!  What a great place. Solid employment, good price stability and Midwestern charm… what else do you need?

Groundfloor will continue to pursue this market as a Key Market in the near term and I expect in the long term as well.