INDIANAPOLIS — As the Federal Reserve issues its biggest interest rate hike in more than 20 years, Indiana housing nonprofits are preparing for additional demand for help.
Housing prices have already been on the rise. A report from real estate firm F.C. Tucker shows as of last month, the average home sale price in Central Indiana rose 10.5% since April 2021.
“You’re seeing a wider amount of folks who now can’t afford in the marketplace,” said Jim Morris, president and CEO of Greater Indy Habitat for Humanity.
The organization has already gotten calls from Hoosiers about the new interest rate increase, Morris said.
Applications for housing are up by at least a third since the COVID-19 pandemic started, and at the same time, Habitat’s building costs have doubled, Morris said.
“We’ve been able to absorb it and still produce, but it’s taken the resiliency of the partnerships to do so,” he said.
Experts say when it comes to mortgages, Hoosiers hunting for a new home will be most affected, along with homeowners whose monthly payments aren’t on a fixed rate.
“That might absolutely factor into people’s decisions about just how much home they want to buy, given that they’ll have a little higher interest payment associated with those monthly payments,” said Andrew Butters, an assistant professor at the IU Kelley School of Business.
Butters points out the interest rate hike is meant to ultimately bring inflation back to normal rates. As people spend less money, he said, Hoosiers could start to see some prices stop going up at a faster rate.
There could be a noticeable difference by the end of the year, he added.
“It certainly also affects businesses as well,” Butters said. “Hopefully as it trickles throughout the whole economy, we will be seeing the slowdown in inflation.”
Habitat for Humanity is not changing the 0% interest rate on mortgages for the families it serves, Morris said. The organization is working with its community partners to ensure enough funding is available to try to help meet any increase in demand, he added.
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