Since 2007, Indiana was rocked by the subprime mortgage collapse and the resulting depression in the real estate market. From indicators both formal and anecdotal, the Indiana real estate and mortgage market may be recovering sooner than other states.

The recovery--if it is indeed a recovery--has been led by bargain-hunters taking advantage of interest rates that are rock-bottom by any historical standard, and home prices that have been at levels not seen in nearly twenty years. 

It's been a buyer's market, as the average time for a home to sit on the market has been anywhere from nine to twelve months. Indiana mortgage brokers, facing a serious decline in home purchases and refinancing, responded by offering the best rates possible.

While the market at present looks bleak, the future looks more promising. Pending sales, in which offers were accepted but the sale had not closed, increased in the March through May period. The bulk of the activity is concentrated in homes priced under $250,000, suggesting a "bottom up" recovery. Homes priced under $125,000 are moving even faster, making that particular subset of the market very competitive.

Indianapolis has fared better than other cities in the Midwest. Thanks to efforts on behalf of city government to diversify the economy, as well as new laws regulating the conduct of Indiana mortgage lenders, buyers appear to have more confidence.

New home sales, however, are a different story. As of February of 2009, home sales in Marion County were down 12.4% compared to February of 2007, although that figure is mild compare to declines in other states. New home starts were down an incredible 35.9%, suggesting a wait-and-see attitude on the part of home buyers.

Home owners can take some solace in the fact that the Indiana realty market was not as hard-hit as other areas of the country. The 12.4% decline in sales is minor compared to other cities. Even more encouraging is the fact that the average sale price is down just 4.1% compared to February of 2007.

The question looming in the minds of many is where the economy in general is heading, and how home sales will be affected. Most economists are calling for the economy to pull out of recession by the end of 2009. Others, however, point to a worrying factor: the possibility of massive inflation next year due to the federal government's historic levels of spending. Should we see double-digit inflation and interest rates, home sales may plummet again.

For this reason, Indiana mortgage lenders and realtors are urging those considering buying a home to do it now, while interest rates and home prices are at their lows. Those who bought homes in the late 1970's and very early 1980's remember the outrageous interest rates that inflation created.