Todays Mortgage Interest Rates and the Indianapolis Real Estate Market

Have you heard that mortgage rates are declining?  Finally, right?  As of today, September 26, 2025, we are seeing mortgage rates in the low 6% range.  We have even heard some borrowers locking in rates in the high 5’s. 

In addition to the inflation and unemployment numbers, interest rates play a significant role in our real estate market.

BUYING POWER INCREASES AS RATES DROP!  Did you know that you can buy approximately 10% more home with every 1% drop in rates?  For example, if rates dropped 1%, you could purchase a $440,000 home instead of $400,000 for the same price.   Buyers are suddenly increasing pricing on their home search now that the rates are coming down.

RELEASING LOCKED UP INVENTORY!  Many current homeowners have fixed mortgage rates in the 3% range.   Those owners have very little incentive to sell their homes, just to buy their next home and jump their interest rate to 7+%.   Majority of homeowners have mortgage rates under 5%, thus causing a ton of inventory that has very little motivation of selling.  That said, it is widely expected as rates get into the 5% range, making the jump from a mortgage in the mid to high 3% to a mid 5% may make sense for many borrowers depending on their motivation.  Therefore, we are very excited to see the rates coming down into the 5% range and hopefully will see that more towards the end of 2025, thus unlocking a ton of inventory. 

Most of the US real estate market has seen a significant rise in homes for sale in 2025 (# of active listings).  In Indianapolis, the real estate market is still a SELLERS market with just 2.5 Months supply of homes on the market.   (Meaning, if we do not put any additional homes on the market, it would take 2.5 months for all the inventory to be sold.)  Anything under 3 months is typically considered a SELLER market.   This number has been rising steadily though, with nearly 8000 homes now ACTIVE on the market.  Just in February of 2025, we were in the high 4000s.  

With more homes on the market, this is giving buyers more options to choose from, however, with rates dropping, buyers are increasingly coming back to the market.   Inventory of homes ACTIVE on the market is up 24% in the Indianapolis market when comparing Sept 2024 to Sept 2025.   SALES are up almost 5% when comparing same time frame.

As we head into the 4^th quarter, the number of homes for sale typically begin to decrease by late October, thus reducing the options for buyers.   Buyer activity tends to slow down as well, however, with the interest rates approaching sub 6%,  we are expecting buyer activity to remain strong in the 4^th quarter and into early 2026. 

There are certain situations when selling and or buying is better in winter months vs summer months and vice versa.  Would love to hear your real estate goals and help you navigate a game plan that is best suited for your situation.