Indianapolis Real Estate Market Forecast 2026

2026 INDIANAPOLIS REAL ESTATE FORECAST

 

1. Existing HOME SALES will pick up slighty 

Home sales have hovered near generational lows for three years now.  In 2020-2021 sales were in the 5.8M to 6.1M, that number has gone down since to around 4.1M in 2025.  As we head into 2026, there’s little reason to expect a sharp rebound, but the pieces are in place for a modest uptick.  Inventory levels are higher than they’ve been since 2019, and mortgage rates are lower than they’ve been since 2022. That combination will hopefully help existing home sales inch upward.   Additionally, we are rebalancing the ‘lock in effect’.   What is the lock in effect?  A huge number of homeowners have mortgage rates of 2%–3%. Selling meant giving up a low payment and buying again at today’s 6% range. Even when someone wanted to move, that jump just didn’t make financial sense. So many people stayed put, fewer homes hit the market, thus creating a ton of locked up housing inventory. 
But here’s the shift:  As of the end of 2025, there are now more homeowners with mortgage rates above 6% than homeowners with rates below 3%.  That doesn’t mean higher rates are “good.” It just means the lock-in effect has less power than it used to, which should help increase sales.


2. HOME PRICES will be flat to up slightly

Home prices are expected to remain relatively flat in 2026.  Analyst’s estimate that rates will range from flat to 2% appreciation in 2026.  This is the slowest annual pace in 14 years despite expectations for several interest rate cuts.   The main reason is higher inventory, putting downward pressure on prices.

Indianapolis: In the Indianapolis IN real estate market, we appreciated 4.5% on average in 2025.

3. Mortgage Interest Rates should decline

The 30-year mortgage rate is set to average 6.18% in 2026, however, with the recent news by President Trump pushing for Fannie and Freddie to purchase $200B of mortgage bonds, some believe this will drive down interest rates further.  But some analysts are also saying that this may not do much to lower rates.  With so much uncertainty with the administration vs the fed, predicting what rates will be throughout 2026 is difficult.  But we do know there will be a ton of pressure to lower mortgage rates.


4. Inventory should continue to climb 

What a relief for the buyer market.  More homes to choose from.   Inventory, or the number of active homes for sale, is likely to finally return to pre-pandemic levels nationally in 2026, perhaps as early as the spring selling season. It rose substantially in 2025, and the number of expired listings suggests there’s a supply of homes whose owners want to sell but are waiting for what they consider better timing.  That could hit this spring. 
Indianapolis:  In the Indianapolis market, our absorption rate recently hit 3.0, which we haven’t seen in many years.   Absorption rate is how long it would take to sell all the current active homes if no additional homes were listed for sale.  A seller market is when that number is below 2.   As the number approachs 3 months supply, it indicates a more balanced market, thus giving the buyer some leverage as well.  As you get into 4 or 5 months of supply, the power shifts to the buyer and becomes a ‘buyer market’.  In the Indianapolis market, we have been in the 1.0 to 2.5 absorption levels since Covid.   However, as the inventory picked up in 2025 and sales softened, the rate has exceeded 2.5 and actually was north of 3 for the first time in a long time this past week (1-14-26). 


5. Avoiding a recession in 2026 

The U.S. economy withstood a number of negative blows in 2025, leaving it shaky but still standing. While payroll gains have slowed to a crawl, the unemployment rate (4.4% in Dec 2025) has only slightly increased.  After the early-year turmoil over trade policy, U.S. companies have been beating earnings estimates in jaw-dropping fashion, while mentions of tariffs and trade concerns have become less frequent in earnings calls.

Midwest:  Indianapolis, IN is in the Midwest region and our region has been the shining light in the US.  Texas, Florida and California are all faring much worse than Indiana and our neighbors Ohio, Illinois, Kentucky, Tennessee, etc.  People are flocking to the Midwest for the affordability and relaxed hospitality.  In fact, the Indianapolis real estate market is still one of the best real estate markets to invest in nationally. We get calls regularly from out of state investors that are looking to take advantage of our affordability and great rental rates.

 

SUMMARY: I’m expecting a relatively flat Indianapolis, IN real estate market in 2026, but should fare much better than many other regions of the country. Sales and home prices should tick up slightly (sales up 2 to 4% and home prices up 0-2%) while mortgage rates come down (I personally believe we will see rates in high 5’s, but analysts are a little more conservative with their 6.18%).  

We will all continue to watch the advancement of AI which is changing daily, the Trump administrations involvement with the fed & the tariffs, the world unrest with war concerns including nuclear involvement, so much uncertainty still to continue throughout 2026 which will inevitably drive our markets. 
All that said, real estate is always a great long term investment.  As Warren Buffet and Charles Schwab would say, buy and hold!  Which is sage advice.  Have you ever looked back in life about a piece of real estate you had bought and glad you sold it? Doubt it.   In fact, you are probably kicking yourself for selling it. 

Some people say, it’s not the right time, but I argue, its always the right time.  The market you buy in is the market you sell in.  While you may pay a higher price, you will sell your current property at a high price.  And if you don’t have a property to sell, it’s still a great time to buy as prices only will go higher.  Yes, they may incur a slight dip here and there, but timing the market perfect is a suckers game.  Buy and hold.. that strategy hasn’t failed. 



Would love to discuss your 2026 and beyond real estate needs and goals.  Feel free to email me at derek@guttinggroup.com.