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Housing affordability is one of the most important issues facing buyers, sellers, the real estate professionals advising them and policymakers representing them. Prices, mortgage rates, and incomes all shift over time, and together they determine how realistic it is for a typical household to buy a home. To help shine a light on these trends, we’ve built a new Housing Affordability Report for Indiana. This blog explains what the report includes, the assumptions behind it, and what the data shows.
At the center of the report is a simple question: What share of a typical household’s income would be needed to afford the typical home in our market? To answer that, we calculate several complementary measures:
Looking at Indiana statewide compared to the national trend, Indiana still retains a relative affordability advantage. Nationally, median payments are 48% of income, while Indiana’s statewide average is only 35%. Our affordability advantage has improved since 2022. Payments rose sharply in 2022 as mortgage rates doubled within a matter of months, showing how lending costs can contribute even more than price change to a homebuyer’s bottom line outlook. Payments ahve since held steady in Indiana while climbing in the U.S. National data is from the Federal Reserve Bank of Atlanta, which uses a similar methodology to IAR
Affordability Has Shifted Dramatically in Some Metros
Across Indiana’s metro areas, the median payment for a new home purchase has risen sharply as a share of income. In 2020, most MSAs hovered in the 15–25% range. By mid-2023, many metros peaked above 35%, and some exceeded 40%.
Three college towns, Bloomington, Lafayette, and Terre Haute, stand out for the steepest increases, with Bloomington near the 50% mark — meaning the typical home there would require half of the typical household’s income. The affordability measure is unique in college towns, where income can be affected by the presence of college students—students in dorms do not count toward household income measures, but those in off-campus housing do. Our report for Bloomington shows that home prices are 19% higher than Indiana in July 2025, but income is 10% lower than the state average. The same pattern appears in Lafayette/West Lafayette. In Terre Haute, prices are very affordable relative to the state but increasing—the median sale price has risen at roughly double the statewide rate over the past two-and-a-half years. Incomes are also 22% lower than the state average in Terre Haute, creating some affordability challenges despite low home prices.
As of 2025, Bloomington, Lafayette, Indianapolis, Fort Wayne, and Louisville rank as the least affordable markets relative to income. Payments consume 35–45% of local median incomes, well above the 30% benchmark for affordability. These markets tend to be Indiana's largest and most dynamic economies. Again, two college towns appear on this list due to below-average income and above average home-prices.
Other areas remain more affordable. Muncie, Michigan City, Kokomo, and Terre Haute all see payments around 25-35% of income on average. Muncie is the standout, consistently at the bottom of the affordability range statewide, with payments at 20% of income. While Muncie falls into the college town category, the share of students relative to overall population is much lower than Bloomington or Lafayette-West Lafayette, meaning presumably less income distortion in tandem with more affordable home prices.
This divergence highlights how uneven affordability pressures are across the state. Some markets still offer relative bargains, while others are stretching household budgets to the limit.
Housing affordability is not just a function of prices; it’s also about income growth, financing costs, and the availability of homes at different price points. By using consistent assumptions, this report helps us answer questions like:
The Housing Affordability Report brings together MLS data, Census income estimates, and nationally recognized assumptions on mortgage rates, taxes, and insurance. While not every assumption fits every buyer, the report creates a clear, consistent baseline for understanding how affordable housing is across Indiana.
By tracking these measures over time, we can better understand shifts in the housing market and help buyers, sellers, and policymakers make informed decisions.