Indianapolis Rental Market Report – October 2022

Hey, guys. Mike Taylor, broker-owner of Red Door of Property Management. Super excited to bring you our October 2022 Indianapolis rental market report update. So were in kind of a weird time right now. It's the fall, kids are back in school, and interest rates are definitely still on the rise. Inflation is on the rise. Rents were going up, but maybe they peaked. Let's take a look. We are seeing a ton of new activity, a ton of new homes hit the market, and a little bit of mixed signals on the average rental price. So let's take a deep dive and take a look at what's going on with the Indianapolis Rental market.

Rental Market Stats

So let's take a look at the numbers for the Indianapolis Rental Real estate market for October of 2022. What's going on here? let's do a little bit of a deep dive and see what the health of the market is. So let's go top left here, active homes for rent. Actually, this is number of new homes that hit the market in October. So new listings with a listing date from October 1 to October 31, 399 new homes hit the market. How does that stack up? Well, look at these numbers compared to last year and last month from last year, October 2021, that is up 284%. And even from last month, that's up 70%. So that is huge. That's a lot of activity, a lot of homes hitting the market. And this is only on the MLS. This is even a small sample set of what's actually going on out there. But this should be a good gauge of what's happening in the overall market. So lots of supply hitting the market. So we're going to have to keep an eye on this because I have a feeling over the next couple of months with this increase in supply that we are probably going to see the average days on the market creep up and may even see average rents start to decrease here because of that increase in supply. Because that is almost a 300% increase from last year. So we'll keep an eye on that in the next couple of months. I would think November, definitely, December's market report should capture that. So we'll definitely keep an eye on this and see what happens with the days on the market and the average rent. But we're seeing a huge influx of homes on the market.

Averages for rented home Indianapolis

Top middle rented homes, 336. So how does that compare to previous years? That's up 20% from October of 2021 and that is down 2% from September of 2022. Not super concerned about it being down from 20. September of 2022 could just be a normal cyclical for the season. Things do slow down as it gets deeper into winter. So not super concerned about that. Encouraged that we had a 20% increase from 2021, but that is kind of negated by the fact that we're up almost 300% from October of 2021 in terms of supply. So it looks like at this point supply might be outstripping demand and we'll see how that affects the numbers going forward because these are just hitting the market right now. So in theory be rented out in the next 30 days or so.

Average days on the market for rented home in Indianapolis

Average days on the market is 33 up 3% from last year and then up 22% from last month. So 22% is only a few days. But again we might be seeing this supply starting to hit the market. Again. We're going to keep our eye on this, but I wouldn't be surprised if that creeps near 40 by December. The average rent is $1531. Now guys, this is in the entire Mibor service area, which more or less equates to metro Indianapolis. It's going to grab stuff from all over. So we do deep dives on several of the other submarkets and you'll see a big difference. We also do what we call a market round-up where you can see how the different markets are in terms of average rent and actually all these numbers. So this is the whole market in general, all of Mibor service area, the average rent is 1531. That is up 2% from October of 2021 and actually down 5% from September from last month. So we are maybe seeing the peak of the market here. Maybe we'll see if this is just a blip, but my guess is with this many active homes again hitting the market that it's probably going to go down again in the next few months. So it's very possible that we have seen the price increases top out for the foreseeable future, at least for the winter, until we run through this inventory and see what happens with interest rates and get into the spring season. So we'll see. Time will tell what will happen with these, but I would not be shocked if peaked for this year.

Absorption rate for rented home in Indianapolis

Let's jump over to absorption rate and then I'll come back to this thing here. Absorption rate. Simply put, again, it's a quick glance at the health of the market. How many homes if we stopped putting homes on the market, how long would it take us to run through that inventory? Right now we're at 1.9, so almost two months' worth of inventory. Feel like that's a pretty healthy environment. We'll keep our eye on that. That might shoot up as well from this new inventory. So just kind of keep an eye on that. And then this bottom middle here, it just kind of breaks down. Where is the activity in the market based on price range? And the reds are the active, the blacks are the rented. So what's in line with in terms of supply and demand? At what price point. So in the 500 to 1000, there's a lot of active and not a ton rented. It kind of equals out here in the thousand to 1250. This is what I call the meat of the market, 1250 to kind of 2000. The supply and demand is relatively equal on both of those with the supply being just a little bit higher. So this would be like in a situation like this, the absorption rate would be almost one because it's almost the same amount of actives that have rented in one month. So just to kind of give you an idea of the absorption rate and a lot more active in the 2000 to 2500 and kind of the same story in the 2500 and the 3000 price point as well. So again, this is the meat of the market here, this 1250 to 2000. And that's where the majority of our investors are. If you're looking at purchasing a home or putting one into use, I would highly encourage you to try to stay within that range because that's where the bulk of the activity is. That's where kind of what we call the meat of the market is. But not to say that you can't have success in these fringes. We have many homes in the 2500, 3500, 4500 range and they're very successful. Hopefully, that gives you an idea of where the Indianapolis market is for the month of October. Again, we got to keep an eye on these active homes that are hitting the market. How it's going to affect things going forward? Our rents going to go up? Is this a Blip? Are they going to continue to trend down? We will find out next month.