Urgent Update: Indiana’s Housing Crisis Deepens Amid FHA Loan Delinquencies

UPDATE: The latest Fall 2025 Kelley Real Estate Outlook reveals alarming trends in Indiana’s housing market, highlighting a surge in FHA loan delinquencies that jumped from 3.7% to 4.8% between mid-2024 and February 2025. This urgent report from the Indiana University Kelley School of Business underscores the escalating affordability crisis affecting homebuyers in the region.

Published biannually, the report features critical insights from Kelley professor Jun Zhu and includes contributions from industry leaders such as Chris Hancock, CEO of the Builders Association of Greater Indianapolis (BAGI). Their findings reveal a troubling economic landscape where financial pressures are mounting for borrowers, making homeownership increasingly elusive.

According to Zhu, the rise in delinquencies signals broader economic issues. “Borrowers are simply experiencing greater financial stress,” Zhu states. The strain is exacerbated by inflation outpacing wage growth, which has eroded families’ capacity to save for emergencies. The report highlights that delinquency rates are climbing not only for mortgages but for auto loans and credit cards as well, painting a picture of a widespread affordability crisis.

Chris Hancock adds that while Central Indiana is showing resilience—with a 6% year-over-year rise in single-family building permits—national trends are concerning. “Affordability remains the most pressing concern for both buyers and builders,” Hancock explains. Rising labor costs, elevated material prices, and stricter lending conditions are critical hurdles that could hinder future developments.

The Kelley Real Estate Outlook aims to bridge the gap between academic research and industry practice, providing actionable insights for real estate professionals. “Our goal is to maximize value for readers by presenting information in clear, industry-focused language,” says Sara Heidtmann Coers, associate director of the Center for Real Estate Studies.

As the report reveals, an unprecedented frequency of natural disasters and rising insurance premiums are also contributing to the housing affordability crisis. Newer homeowners, who lack equity cushions, are particularly vulnerable to these financial shocks.

Despite these challenges, the report reassures that the current environment is not reminiscent of the 2008 housing crisis. Enhanced foreclosure-prevention tools and a strong FHA insurance fund provide essential safeguards against systemic risk, according to Zhu.

The Fall 2025 Kelley Real Estate Outlook serves as a vital resource for understanding the forces shaping Indiana’s housing market. As the situation unfolds, stakeholders must collaborate to address ongoing challenges to ensure Central Indiana remains a dynamic and accessible market for housing.

Stay tuned for further updates as this developing story continues to evolve.