UPDATE: The Indiana University Kelley School of Business has just released the Fall 2025 Kelley Real Estate Outlook, revealing critical trends in housing and alarming increases in loan delinquencies. This urgent report, published today, sheds light on the growing affordability crisis facing homebuyers across the country, particularly in Central Indiana.
In a stark finding, the report highlights that serious delinquencies on Federal Housing Administration (FHA) loans have surged from 3.7% to 4.8% between mid-2024 and February 2025. These loans, which are designed to make home ownership more accessible, are now facing unprecedented challenges as financial stress mounts for borrowers.
Led by Kelley professor Jun Zhu, the research indicates that the increase in delinquencies is not due to typical factors like relaxed lending standards or slowing home price appreciation. Instead, Zhu emphasizes a simpler explanation: borrowers are grappling with significant financial strain. “Inflation has consistently outpaced wage growth, eroding families’ ability to build the emergency savings needed to weather unexpected financial shocks,” Zhu states.
This situation is compounded by the rising costs of living, including skyrocketing insurance premiums and property tax increases, particularly affecting new homeowners who lack equity cushions. “Delinquency rates have climbed across auto loans, credit cards, and buy-now-pay-later products, suggesting a broad-based affordability crisis,” Zhu warns.
“Our goal is to maximize value for readers by presenting information in clear, industry-focused language.” — Sara Heidtmann Coers, Associate Director, Center for Real Estate Studies
Alongside Zhu’s findings, the report features insights from Chris Hancock, CEO of the Builders Association of Greater Indianapolis (BAGI). He highlights that while national trends indicate slowing new home construction, Central Indiana is faring better, with a 6% increase in single-family building permits year-over-year as of June 2025. Hancock asserts that collaborative efforts among builders, policymakers, and community leaders are essential to navigate the challenges posed by rising labor costs and material prices.
Despite these localized successes, Hancock warns that affordability remains a pressing concern for both builders and buyers. “The trifecta of rising labor costs, elevated material prices, and tighter lending conditions directly impacts what gets built,” he explains, stressing the need for immediate action to sustain Central Indiana’s housing market.
The Fall 2025 Kelley Real Estate Outlook aims to bridge the gap between academic research and industry practice, providing actionable insights for professionals. “Our world is increasingly data-driven, and while technology has transformed real estate development, most people still lack access to free, reliable data,” Coers adds, presenting tools like the Power Grid, which consolidates essential market metrics into one accessible resource.
As the housing market faces significant challenges, the findings from the Kelley Real Estate Outlook underscore an urgent need for stakeholders to address the financial pressures affecting homebuyers today. The report serves as a crucial roadmap for understanding the forces shaping Indiana’s housing landscape and highlights the broader implications for communities nationwide.
Stay tuned for further updates as this developing story unfolds, particularly as officials and industry leaders respond to the pressing need for solutions in the housing market.
