How sure are you that this is the right time for you to settle down in your very own home?
Buying a home is one of the things that most people grow up hoping to do one day. Who wouldn’t want to have a property as an asset in their name, and more to that, why wouldn’t you want to gift yourself and your loved ones a well-deserved home where you can put down roots and raise a family?
You’re a recent graduate, or a seasoned young professional, and you have so much to offer the world. While it’s true that the economic landscape has changed dramatically since your parents signed their first mortgage, the first few real estate decisions you’ll make are still so important in planning for the future.
Investing in real estate for the first time can be overwhelming and even intimidating. It can also lead to a lot of fun and financial success. Everything depends on your outlook, education, and street smarts when it comes to the real estate market.
Usually people get to wade gradually into investing. Buying a house is more like a plunge into the deep end. With other investments, you can start small and then make bigger commitments as you gain a little experience. So, you put a few hundred dollars into a stock, or have money going into a 401(k) retirement savings plan. Then you ramp up to bigger investment decisions over time. When you buy your first house though, you may be committing hundreds of thousands of dollars to a type of decision you have never made before.
To help overcome that lack of experience, think through the process of buying a home from an investment standpoint.
I call the absorption rate the early warning indicator because sometimes it lets you actually get out in front of a movement in real estate prices. Once you learn how this works, you’ll know something around half of real estate professionals don’t understand.
The absorption rate is the rate at which homes are selling based on a time length measured and the sales as compared to the currently listed inventory. In other words, you have 4000 homes currently listed. You want to see the absorption rate based on the previous three months, and you find that in that time 1500 homes sold.