Rising unemployment driven by job losses in the auto industry and small business have sent the Indiana housing market into a near tailspin, and housing prices don't look like they're going anywhere but down for quite sometime. The Indiana housing depression is worsening.

The gloomy portrait of Indiana real estate comes at a time when incomes are dropping and the overall economy is in a recession. Indiana is in a real estate depression. Unemployment rates in Indiana have doubled and are expected to rise, which will increase home foreclosures.

The sale of homes in Indianapolis are plunging as more and more homeowners walk away from their houses as a result of being unable to afford the mortgage. The real estate crisis is having major affects on the Indiana economy, and is only expected to worsen, despite government plans to refinance homes in foreclosure. Nationwide more than 3-million adjustable rate mortgages are due to readjust in 2009, many of which will go to foreclosure since they won't be appraised at a high enough value.

As home values fall in Indianapolis, more homeowners are becoming upside down in their homes, which is when homeowners owe more on their mortgage than what the property could be sold for in today's market. Foreclosures now account for nearly half of all sales. By the end of 2009 the statewide average is likely to hit more than 35%, a record high. Housing Predictor forecasts Indianapolis will have another slow year of home sales in 2009 on average housing deflation of 12.8%.

City	Forecast
Indianapolis	− 12.8%
Gary	− 13.0%
South Bend	− 11.8%
Fort Wayne	− 11.2%

The community of South Bend is hurting. Home prices and sales are heading south. The only part of the market that is staying afloat seems to be foreclosures, which are selling on the cheap in attempt by bankers and investors to get them off the books. The move to sell foreclosures rapidly is unprecedented as lenders try to stay in business during the credit crisis.

South Bend is projected to see slower home sales in 2009 and is forecast to experience average housing deflation of 11.8%, which is, however, below the national average of 12.5%, much of which is being experienced in even harder hit markets.

Fort Wayne's lower home prices have acted to protect the market to some degree from deflation. The medium price is slightly under $100,000 and the price of a single-family home in Fort Wayne was down in single digits for the year, and is forecast to hit 11.2% in average deflation in 2009 by Housing Predictor.

In Gary, which gained so much fame years ago for the song with its name an inventory of homes for sale is mounting, but there are few bargain hunters searching for homes in Gary. The community is bracing for more lay-offs by auto makers. Gary is forecast to experience average home values deflate 13.0% in 2009.