Boone County draws young homebuyers in a challenging Indianapolis housing market

Taylor Ellison, 28, didn’t see herself living in Whitestown.

In 2021, Ellison and her boyfriend put in several offers on homes in the Avon/Plainfield area, but were outbid each time by cash offers. When they restarted the search this year, they decided to build a home in Whitestown, a Boone County town experiencing rapid new home construction.

They purchased a three-bed, two-bath D.R. Horton ranch home in April.

“It made it a little bit easier for us as first-time homebuyers in terms of financing and having more flexibility with the down payment and not having to get into a bidding war,” said Ellison.

Whitestown and Boone County lead what's been a relatively cool building market this year. Boone County saw a 19% total increase in permits issued compared to last year, according to September data from the Builders Association of Greater Indianapolis. Building is down 9% in the Indianapolis metropolitan area as a whole since last year, according to builders association data.

Steve Lains, CEO of the builders association, said he thinks the market bounced back this summer and expects to near or equal 2022 numbers by the end of the year.

The year-over-year building gap closed significantly between August and September, partially because permits reflect the market of four to six months ago, Lains said.

"The interest level in new construction and purchasing still seems high," Lains told IndyStar.

Record-low pandemic-era interest rates have disincentivized people who bought or refinanced during that time to sell, making longtime homeowners out of people who may have otherwise been looking to move. That pressure's contributing to an overall supply shortage, and new home builders say they can't build enough houses to keep up.

“There’s a lot of people who bought at 3% mortgage rates, so they’re staying in their homes and a lot of people are looking at new construction as an opportunity to get in a home,” said Watkins.

The resale market is no help.

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High demand coinciding with limited supply continues to be a problem for the Indianapolis metro area's home market. There was a 1.8-month supply of homes on the market as of September — a balanced home market should have four to six months' supply — and the number of listings was down 9% vs. September 2022, according to data from Realtors’ association MIBOR.

Boone County is booming

Boone County has seen the highest overall year-over-year growth for new home construction this year. In August, home permits were 118% higher in Boone than they'd been the year before, and in September they were up 55%. There have been 632 permits issued in Boone County this year compared with 530 at this time last year.

That’s partially due to the large supply of cheap land, but the county's rapid growth is also fueled by the state’s Limitless Exploration/Advanced Pace (LEAP) District in Lebanon, which is poised to bring billions of dollars in tech and manufacturing developments to the greater Indianapolis area.

Watkins said builders, including Arbor Homes, are aggressively looking for land in Lebanon and across Boone County.

Whitestown has benefited from more relaxed city guidelines compared to nearby Zionsville, where it's harder to get new housing projects approved due to stringent standards, said Watkins.

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Other Indy metro counties growing slower

Surrounding areas are seeing less growth despite generally being larger than Boone County. As of September, 500-plus fewer permits had been issued across the Indianapolis metro area compared to 2022, according to the builders association.

Hamilton County, as usual, is leading the greater Indianapolis region in homebuilding, with 2,162 permits to build new homes issued in the first nine months of 2023. That just a 6% increase from 2022, which saw 2,049 as of this time last year. More than half of those permits are for construction in Westfield, with Noblesville, Carmel and Fishers following behind.

In contrast, Marion County has issued 1,065 permits so far, almost exactly on par with 2022, and the vast majority are in Indianapolis. In Hendricks County, most builders are targeting Danville and Brownsburg, but overall permits issued have increased just 2%.

Growth is tapering off the fastest in Johnson County, where 362 permits have been issued compared to 696 at this time last year — a 48% decrease. Hancock County issued 52% fewer permits than last year.

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Challenges to building

Builders have previously said they hope cities and towns change their local zoning requirements — allowing for smaller lots and higher densities — to make homeownership more affordable and available. Cities and towns use such standards to control how they grow and develop.

“If you have cities that are open to development and new construction and are willing to partner with builders, it really can benefit both the city and builders,” said Ben Watkins, chief marketing officer with Arbor Homes.

There are several reasons homes aren’t getting constructed quickly enough to meet the needs of customers looking to buy in popular areas like Hamilton and Marion counties. Among them: the COVID-19 pandemic’s impact on the supply chain and the time it takes to develop infrastructure like roads and sewer systems.

“It’s now just kind of coming to a head,” Lains said.

Since those early pandemic-era interest rates, Jordan Masiak, who was until recently a sales counselor for Fischer Homes, said builders have been trying to keep up.

“The new construction market in Indianapolis, we’re still playing catchup to the height of the frenzy that we saw in late 2020 and really all of 2021 and early 2022, when interest rates were so low,” she said. “I think we’re finally getting to that point.”

A new era for young homebuyers

Stacy Barry, who leads a team of real estate agents at Century 21 Real Estate, said that demand isn’t slowing down. Plenty of people are moving to the Indianapolis area to take advantage of what it has to offer.

“The influx of people relocating to Indianapolis for better schools, or cost of living, or because our taxes are lower, there’s still just a mass of people coming in and businesses coming in,” she said.

But it’s becoming increasingly difficult for buyers — especially first-timers — to find homes selling for under $300,000.

A recent IndyStar investigation also found that investor activity in the Indianapolis home market is driving up home prices in areas where investors are active, making it harder for low- to moderate-income buyers to compete with all-cash offers.

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“Wealth accumulation in our country happens through homeownership," Watkins said. "There is an affordability crisis in our country and in Indianapolis."

Hotly demanded residential areas like Carmel are more interested in seeing construction of higher-end homes to increase the local tax base, Lains said. For younger people with lower incomes looking to start families in areas like Hamilton County, that can pose a serious challenge.

“Millennials and Generation Z are now getting to that family-generating stage with dual incomes and wanting to get out of apartments,” Lains said. “But the options are just limited.”

Ellison, who grew up in Carmel, never saw herself living in Whitestown, but she said she and her boyfriend are loving it. They have a pickleball group with their neighbors and enjoy the access to the Big 4 Trail, a pedestrian path that runs through Boone County.

For Ellison, moving to an up-and-coming area meant the couple was able to get a bigger, nicer house while staying well within their budget.

"We were just able to get more of what we wanted as far as a neighborhood and things like that than we would have in one of those bigger cities," she said.

Contact Tory Basile on Twitter @torybasilee. Contact Claire Rafford at crafford@gannett.com or 317-617-3402.

This article originally appeared on Indianapolis Star: Indianapolis homes: Boone County strongest for new construction