‘Unprecedented’ Indiana housing market leads to concern over FHA buyers being pushed out

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INDIANAPOLIS — In a housing market with high demand and the lowest inventory in almost 15 years, fair housing experts expressed worry that some buyers’ loan type is keeping them from competing for homes.

Shay Morris, 31, wanted to buy her first home, so she obtained pre-approval for a federally-backed FHA loan and started putting in offers earlier this year. The loans, which are used by more than one in five Hoosier homebuyers, typically require less money down and lower credit scores than conventional loans.

After putting in offers on several homes and enduring many multiple offer situations, Morris contacted the National Fair Housing Alliance after she suspected that her FHA loan could be putting her at a disadvantage.

“I didn’t have a fighting chance, not with people offering $35,000 cash above asking price,” Morris said. “I’m not being considered and … it’s really frustrating, it’s really discouraging, it’s really disheartening.”

“We’ve been hearing lots of complaints,” National Fair Housing Alliance President and CEO Lisa Rice said.

Rice pointed to demographics that show more Black and Latino homebuyers, many of them first-time homebuyers, use FHA or other federally-backed loans. She believed sellers across the country could be devaluing the loans, due to perceptions that they take longer to close and stricter requirements for inspections and appraisals.

“There are so many consumers who depend and rely upon FHA financing that shutting them out of the market really isn’t fair for many, many hard-working families,” Rice said.

According to data provided by the Indiana Association of REALTORS, the percentage of homes being sold in Indiana to buyers with federally-backed mortgages, like FHA or VA loans, has declined since 2017, from 29% in the period from January to April to 22% in the same period in 2021. The percentage of conventional loans increased in the same period from 43% to 56%.

“Realtors are committed to protecting the American dream of homeownership for all. Homeownership is a path toward individual wealth, family security, and strong communities. We work daily to protect and strengthen the ability of our clients to own, buy, and sell real property. Included in that work is advocacy for the preservation and improvement of the federal government-backed mortgage programs that help so many achieve homeownership.”

Roger Lundy, 2021 President, Indiana Association of REALTORS

Additionally, state data shows that inventory has declined steadily since 2007, reaching historically low levels in recent months.

Regina Jones, President of Indiana’s MIBOR Realtor Association, agreed this is a difficult market for buyers, but said she does not believe FHA or federally-backed mortgage borrowers are being singled out. However, she did acknowledge that given the rise in multiple-offer situations, buyers often need extra cash to compete for homes.

“Whether you’re an FHA loan, a conventional loan, a VA loan, it’s hard to compete with cash, especially if a cash buyer is willing to go over market value or over the list price,” Jones said.

Jones noted that she has helped buyers, including those with FHA loans, secure a home despite the difficult market.

“I don’t want people to be so disparaged that they feel like, if I don’t have a bunch of extra money on the side, I can’t get a house, you absolutely can get a house,” Jones said.

Still, first-time homebuyers like Morris may find themselves weighing whether the stress and months of effort will be worth it and whether they’re getting a fair chance in the first place.

“I may have to go conventional if this is what I truly want and save up a little bit more, but it’s definitely something I’m hoping to revisit towards the end of the year,” Morris said.

If you believe you’ve been discriminated against during the homebuying process, you should report it to the Fair Housing Center of Central Indiana.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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