Bloomington’s a difficult place to find a home during normal times. But since the coronavirus pandemic, housing prices have skyrocketed and the housing market is red-hot.
A year ago, the average house in Monroe County went for $266,699. Today, the average sale price is over $303,000. It’s a seller’s dream and has been a nightmare for many buyers.
Bloomington realtor Steve Smith says it’s simple economics.
“It's a lesson that any fifth-grade economics teacher would love – it's supply and demand,” Smith said. “Supply is low and demand is high, and that drives price up. And it's a little bit like a feeding frenzy with what's happening.”
Smith has been helping prospective homebuyers navigate a market where houses are selling like hotcakes, and it hasn't been easy for buyers.
The most recent data from the Indiana Association of Realtors show almost 50 percent fewer homes for sale now in the state compared to last year.
From 1986 to 2000, 1.5 million housing units were completed annually nationwide. The U.S. averaged only 950,000 new units from 2008 to 2020, following the housing market crash and Great Recession. (National Association of Realtors)
In Monroe County, there were 164 fewer houses on the market in May, down 31.8 percent. Nearby Brown, Lawrence and Morgan counties tell a similar story.
Lack of supply, increased demand, record-low mortgage rates and restlessness from pandemic lockdowns have created the perfect housing frenzy. Buyers are doing just about everything to secure homes.
Take Tim Aiken, for example.
Aiken had lived in the Chicago area for the last 24 years but began thinking during the pandemic of moving back home to Bloomington – his daughter’s leaving home for college this fall, and the cost of living is cheaper than in the Windy City.
“It was a good time to make a change,” he said. “Financially, just smaller, greener, quieter.”
So when he saw his new Bittner Woods home listed online, he didn’t waste any time.
“This (house) came on the market at noon,” Aiken said. “And at 2 p.m. I was in the car, driving down (to Bloomington) for a 7:30 p.m. showing and put the offer in at 10 p.m.”
When Aiken bought his home in Chicago, he took his time and compared offers. That doesn’t work today.
“Back then you negotiated, and you threw in an offer below asking, of course. Here, it's maybe you start at asking. But if you really want it, you go above asking,” he said.
With potential buyers willing to go thousands over asking price, the median home price in the state has jumped more than $30,000 in the last year – buyers are willing to pay cash, waive appraisals, even skip inspections.
Lindsay McGuire gestures to some of the goods she has packed for her move. “It was very much a mindset of, ‘We'll try. If it doesn't work out, don't be heartbroken,’” she said. (Alex Paul, WTIU/WFIU News)
Lindsay McGuire remembers arriving at house showings where three or four other families were looking at the same property.
“There’d be real estate agents with their cell phones out doing virtual tours,” she said. “It was just crazy.”
When McGuire and her husband found their new home, they knew they wouldn’t be able to outbid their competition. So they wrote a letter to the seller explaining their situation and why they wanted the house.
“Our real estate agent called us and she said, ‘Oh, well, you know, they did receive multiple offers. Yours was not the best, but they loved your letter,’” McGuire said. “And it was just like, what?!”
But not everyone looking for a home will luck out with a letter. The serious price hikes and supply shortages are leaving many first-time or low-income home buyers on the sidelines.
The National Association of Realtors reported last month a dearth of nearly 6 million housing units since 2001.
Matt Kinghorn, senior demographer at the Indiana Business Research Center, said a common measure of the housing market is “months supply of inventory,” or how many months it would take for the current supply of homes to sell.
“Right now, that measure is below one month,” Kinghorn said. “And really, kind of the rule of thumb for an even housing market is about six months of supply. Indiana has never been anywhere like this.”
Both Kinghorn and Smith agree the solution is more housing. But the price of building materials has increased since the pandemic, and with the market on fire as it is, it makes more sense financially to build more expensive homes.
“We're starting to see more construction, and hopefully with that construction, we start to see more of that kind of starter home enter the market,” Kinghorn said. “That's really what we're going to need to kind of bring some normalcy back to the market.”
