Housing crunch hits metro area For June, home sales go through the cellar Higher rates, overbuilding cause market to plunge 22% By Jeff Swiatek, The Indianapolis Star Home sales plunged in the Indianapolis area in June, falling 22 percent from their year-ago level, and real estate professionals fear a wave of property-tax increases will keep the market from recovering its vigor anytime soon. Ripple effect? Crowds gathered at a rally Saturday outside the governor's residence on Meridian Street to protest the surge in local property taxes. Real estate agents and home sellers believe the higher taxes caused by court-ordered reassessments are helping stymie home sales. - Photo provided by Jared Paul Haller "We're swallowing hard," said Susan Blandford, a regional manager for Carpenter Realtors. Among her colleagues and clients, she said, "there is a level of uncertainty." Normally the time when home sales bust loose, June instead rated as the weakest month so far this year for the residential market. The Metropolitan Indianapolis Board of Realtors counted 2,887 sales completed during the month, compared with 3,700 a year ago, according to preliminary numbers released Thursday by Landrigan & Co. Realtors. Pending sales in June showed a smaller decline of about 9.2 percent from a year ago. With half of the year past, home sales are down 9 percent from last year's halfway mark, to 15,111 closings in the 13-county area, Landrigan reported. The slowdown so far in 2007 shows the Indianapolis market has cooled off from its red-hot state in 2005 and 2006, the two best years ever locally for the number of homes sold. "The last two years were just excellent years. Now the market's back to normal," said Gary Warstler, executive vice president at F.C. Tucker Co. A downturn in home sales has dire implications for the economy. Home buyers typically spend thousands of dollars on services and goods for their new homes, spurring business for everything from pesticide companies to appliance dealers to landscapers. Already, builders are cutting back. Permits for new homes were down about one-third during the first three months of the year, leading KB Home to announce this week it will exit the Indianapolis market. Sales of existing homes have suffered from slightly higher mortgage interest rates, overbuilding of new houses, and a loss of consumer confidence. Widespread jumps this summer in property tax rates, prompted by state-mandated reassessments of property values, now threaten to thwart any effort by the market to bounce back. "It's not good, that's for sure," Warstler said of the tax hikes. "It's definitely not going to increase sales." Property tax rates in Marion County have jumped an average of 34 percent. Surrounding counties have seen less drastic jumps. "What I'm particularly anxious about now is how the irresponsible property-tax situation will have an impact on this mixed market," said G.B. Landrigan, president of Landrigan & Co., in a statement. Warstler said he sees the tax increase causing people to buy less expensive homes, while some retirees on fixed incomes could have troubling staying in their homes because they won't be able to afford the taxes. "If their taxes go up $200 to $300 a month, that's a killer," he said. Loretta Doyah, who is selling her three-bedroom ranch in Noblesville on her own, said she is not surprised to hear the market has slowed. She's had "very little response, very few inquiries" to ads she has run and a for-sale sign she posted in her yard last month, she said. "I'm thinking there are not many lookers right now," said Doyah. She wants to sell her home for about $147,500, so she can move to be near her son. She blames the property tax increase, in part, for discouraging buyers. "Higher taxes are really a turnoff to people." Sales of distressed homes, including homes described as "fixer-uppers" and properties repossessed by the lender or sold at sheriff's sale because the owner failed to pay the mortgage, hit 37 percent of all home sales tracked by MIBOR in June in Marion County, according to MyCastle Indy/Vital Equity, a Broad Ripple company that specializes in helping people buy distressed homes. Warstler, whose company -- F.C. Tucker -- is the largest home seller in the market, said he thinks true distressed properties make up only about 10 percent of area home sales. Blandford, of Carpenter Realtors, sees the once-vibrant move-up market, including people looking to sell their homes and buy more desirable ones, drying up. "You better evaluate why you want to move, and it better be a pretty good reason," she said.