Blog > The Stats of Real Estate

The Stats of Real Estate

by www-findorangecohomes-comOctober 31, 2019

Real Estate Dream Team
Photo by Steshka Willems from Pexels

When you made your dream team list for your fantasy league (baseball, football, basketball—doesn’t matter) you likely did some research and chose players based on their stats—historical data that gives you a hint about whether they are potentially a good “investment” for your team. In fact, no fantasy player worth their cleats would choose without checking out a players’ stats or projections first. You wouldn’t turn to your best friend from middle school or your Uncle Jimmy—neither of whom has seen a sporting event since the last high school game you played in. You’re going to go with the facts.

What in the world does this have to do with real estate? Though far from being a game, real estate also relies heavily on stats and if you are in the market to buy, you should be looking at them, too. Truth is, making such a big investment can be intimidating, even downright scary. Well-meaning family or friends may have some insight based on their own experience, but that only gives you a tiny piece of a very large puzzle. It’s having the facts that can help you make a decision that you can feel confident about.

How Do I know if it’s a Good Time to Buy Real Estate?

There are a number of statistical factors that we can look at when trying to determine if it’s the right time for you to invest. The chart below shows that in the past 12 years, 1st time home buyers have dramatically reduced their exposure to financial risks. When buyers make more stable investments, they are less likely to struggle with or default on their mortgage loan. That means the market is not flooded with distressed homes and buyers or banks desperate sell, so there is not an abundance of low- priced homes. The stats below would indicate a trend towards increasing home prices.

Economic & Buyer Stats

Plan for the Future

Your first reaction might be to feel nervous about this trend and that you absolutely have to buy now before home prices continue rising. Or you might want to wait a few years until home prices begin to lower. How do you decide? Well something you might want to consider is that generally when property values (and in consequence home prices) fall, interest rates tend to go up. So, you may be paying less for the house, but you’d be paying more in interest.

If you look at the 2 sample mortgages below, you can see that buying at a bit higher price with a lower interest rate gives you a comparable monthly payment as would a lower priced house with a higher interest rate. But when you look at the total amount of interest paid by the end of the loan, the higher priced home with the lower interest rate is significantly less than the other. So, when interest rates are good, rising home costs do not necessarily mean that it is a bad time to buy.

Mortgage Calculator

Sample Mortgage

Conclusion

Statistics over the past 12 years have been showing a steady growth of the US economy, giving indication that the market will remain strong. Though whether you are drafting fantasy team picks or investing in real estate, you know that there are always certain risks because there is some unpredictability involved. But with solid research and current information, you’ll be well equipped to knock it out of the park when you make your decisions.

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