Indianapolis is one of the largest cities in the Midwest. After suffering through the rust belt downturn, economic conditions have stabilized and the city is on the upswing. A focused downtown redevelopment has created a dynamic, livable and expanding city center.

Market Insights

Home values have been experiencing single-digit annual increases and have recovered to 12.45% above pre-recession peaks. The Federal Housing Finance Agency's (FHFA) House Price Index gave the metro area a rating of 161.97 at the previous peak and 147.45 at the bottom. In March 2016, the rating was up to 182.13. However, the median listing price for the metro area is $139,000. Numerous zip codes within the city have median listing prices below $75,000.

The downtown redevelopment area is the best choice for buyers looking for a combination of livability and profitability. There are still affordable properties in prime parts of downtown. As gentrification spreads, excellent opportunity is available to those willing to take a chance on neighborhoods at the edge of the prime areas.

Property and Transfer Taxes

Property taxes in Indiana are handled at the county level. Marion County collects the taxes for Indianapolis. The tax rate is based on the total of the rates charged by all the different taxing authorities that serve a property. The county has 26 different tax rates that apply to various sections of the city.

The tax rate for residential real estate is not applied to the full value of the property. Every homeowner gets a $45,000 exemption plus a supplemental county deduction equal to 35% of a property’s remaining value. A $200,000 home in central Indianapolis receives a $45,000 exemption plus a $54,250 supplemental exemption, leaving a net assessed value of $100,750. The net assessed value is multiplied by the tax rate of 3.0273% to get an annual gross tax of $3,050.

However, state laws cap property taxes at 1% of gross assessed value, which sets the highest allowable tax at $2,000. The calculation is not done yet. If a tax is lower because of the tax cap, an additional 0.2025% is charged on the net assessed value. The final property tax becomes $2,204.

Fortunately, the state provides a calculator that covers more than 2,000 different tax districts. The tax cap on residential rental and agricultural property is 2%. The cap on commercial real estate is 3%.

There are no property transfer taxes in Indiana. The Marion County Recorder charges a small per-page fee to record a new deed.

Most Expensive Neighborhoods

The central downtown district consists of 10 smaller main neighborhoods. Downtown has the highest median listing price, which is $325,000, of an area in the city or the state. Smaller properties or still redeveloping sections of downtown list for half that amount. Larger homes in the highly desirable 64-square-block northeast quadrant list for twice that amount or more.

The Mass Ave Arts District is six blocks in size, and all of downtown is within a maximum of 10 blocks. This is the cultural center of the city, with a vast selection of galleries, restaurants and shops. A new condominium project, including one 5,500-square-foot penthouse listed at $1.99 million, makes this the most expensive section of the city.

Lockerbie Square is an eight-block neighborhood immediately to the east of the Arts District. It is the city’s oldest neighborhood and is a registered historic district. Mansions are mixed with smaller cottages and apartments. Some streets are still paved with cobblestones and have brick sidewalks. Lockerbie Square is a family friendly oasis, with urban amenities in walking distance. A 5,400-square-foot home in the heart of the neighborhood lists for $1.39 million.

Chatham Arch borders Lockerbie Square on the north. The neighborhood mixes historic homes with newer homes, apartments, condominiums and commercial property. A 3,100-square-foot newer home, designed with an historic exterior, lists for $745,000.

St. Joseph is just west of Chatham Arch. It combines Civil War-era cottages with elegant brick row houses. Redeveloped sections combine converted commercial structures and new urban condos. The neighborhood has the funky urban historic mix that urban dwellers love. A 150-year-old restored row house is on the market for $789,000. The 5,700-square-foot home comes with a pool and private yard.

Top Real Estate Websites

DowntownIndy.org is the website of the non-profit organization responsible for developing and promoting downtown Indianapolis. It provides concise descriptions of all the neighborhoods, along with a map, and has information about everything going on in downtown Indianapolis.

TalkToTucker.com provides information on more than 300 neighborhoods in the Indianapolis metro area. Each description shows all of the homes listed for sale within the neighborhood.

HomeToIndy.com covers all the historic districts, along with the major suburbs.

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