Is buying a home a good investment?
When talking to renters, a lot of them will say that they can’t afford to buy a home. This inspired me to do some research to find out which is really more cost effective. So I came up with this plan for a question to answer –
Where was the average home value in Denver 20 years ago, and where is it now?
That puts us at 1997.
And that was a pretty great year for Denver. The Broncos started a back to back super bowl win streak, we had a crazy blizzard, Friends and Seinfeld were still on, wages were high and unemployment was low! Gas prices were $1.32 on average… And people thought that was high.
All of this data is coming from the public record and the MLS. Unfortunately, the MLS doesn’t keep data for that long and the public record makes it a bit more difficult to access. So I have a lot of really good information, but definitely not as much as I’d like.
For 1997, I have data from the public record for the entire year. It’s homes sold in the greater Denver metro area. 2,426 records in total.
For the 2017 numbers, I used the MLS (Metro Listing Service). This is the system that every broker uses to list homes. It also keeps track of the stats on every home sold.
So let’s start with the obvious one…
Home Sale Price
|Average Price Per Home|
Or like this
As you can see, the differences are substantial to say the least. An average for the year of a 282.05% increase. The biggest difference was in May – $142,192 in 1997 and $431,734 in 2017. That’s a whopping 303.63%
Let’s put that another way. That would be the equivalent to you purchasing $142,192 in Apple stock on July 15th, 2011 and cashed in today!
But the differences between investing in stocks and a home are plenty. The biggest is that you know it’s going to go up. Housing prices always do! And the second is that it’s a functional investment, meaning you can actually use it.
Price Per Square Foot
|Price Per Square Foot|
Price per square foot is a pretty easily calculation. You just divide the total selling price of a property by the number of square feet listed on the public record.
This chart is very telling as well! The differences here are huge! The biggest is in February, 2017 being 427.71% higher than in 1997. That is substantial to say the least!
It’s hard to argue with that data.
But how do I know my home will gain value?
When you think about it, the biggest question that comes up about home value is “How can I be sure that the market won’t crash and I won’t lose money?”
This data is especially interesting in regard to that question. Think about it, we have had just about every major crisis that can affect home value happen in this timeframe.
Recession, the mortgage crisis, multiple wars, high unemployment. We had substantial changes to the way our country was run, from the Presidents to their policies. Natural disasters and seemingly cataclysmic events.
But regardless, we have seen insane levels of growth in home value. That’s because the simple rule of supply and demand – and there’s only so much room for homes around Denver.
See Also: How to Start Investing in Real Estate
So, is Buying a Home a Good Investment?
On paper, it’s a clear and definite yes.
But that’s not exactly the same answer for everyone. There is a lot more that goes into buying a home than just a mortgage. Check out my article, **Am I ready to Buy a Home**
If you’re not ready for the work and effort that go into owning a home, it’s probably not a good investment for you. However, if you are, use the button below to contact me and let’s get you started!