Real Estate Is Still Key to Wealth—But It’s Taking Longer.

This year, the National Association of REALTORS® came out with an article titled The 5-Year Rule Is No More. It was all about how long a buyer needs to stay in a home to “truly break even.” That old drop of wisdom about holding onto a home five years to recoup the cost of closing and moving? It hasn’t aged well.

Elevated interest rates, combined with a lull in the overall market, means today’s deed seeker must lengthen the expected break-even time frame, the agents’ group tells buyers.

In short, home value appreciation is slowing down. If you buy in 2025, don’t count on recovering your costs until 2035 or beyond.

Your Mileage May Vary

Real estate prices are, literally, all over the place. Because market dynamics vary by location, we see purchase prices up from last year by 10% in the Northeast, about 6% in the Midwest, less than 4% in the West (yet San Francisco sellers are asking nearly 11% less than last year!), and down just about 2% in the southern states.  

The typical price tag across the board is nudging $400k. With ten percent down, a mortgage rate of 6.6%, a tax of 1.7%, and 4% closing fees, it’ll take ten years for the typical home buyer to break even — assuming that the home’s value keeps appreciating at the rate of 3.8%. But given that markets are seeing prices rise faster in some locations, some buyers will bounce back higher and faster than others. In any case, home values do (sometimes in fits and starts) rise over time. At the same time, says the National Association of REALTORS® in Realtor.com®, with the U.S. population experiencing a drop in overall buying power, ”the housing market’s ability to create more wealth is not what it used to be.”

On top of this, property taxes are going up. So is homeowners’ insurance. Both of these cost factors vary a lot by location. 

Rental costs are getting out of control, with half of all U.S. renters now paying more than 30% of their income on housing and utilities. Could owning a home become a buffer against inflation?

Best Bet: Timing the Market? Or Buying a Home ASAP?

For most people, although a home is an investment, it’s primarily where we spend our lives. To many, it’s central to the idea of “putting down roots” in a place. It can bring a sense of independence that far outweighs the satisfaction any investment can bring.

So, we buy. We enjoy the independence of holding a deed, we pay off our mortgages, we pay our taxes, supporting local schools. Our homes are personal ties with a community.

If a home were nothing beyond a source of wealth, we might try to time the market. But even so, we could time it wrong.

That’s why most of us buy when the timing seems personally right. And for most of us, our deed represents an important asset and an ongoing credit builder. Owning is cheaper than renting in many cases, and paying the mortgage enables a buyer to hold and keep an ever-increasing slice of the property’s value as home equity.

If a hopeful buyer has a choice between buying now or later, getting an early start on taking out a mortgage could have value in its own right. It could help the deed holder resolve the debt by the time that matters most in life.

High home prices and mortgage rates — plus the rising costs of renovations, cabinets, and furnishings, etc. due to tariffs — jeopardize affordability. But at least buyers are not facing hot and heavy bidding wars everywhere they look. Buyers in some formerly hot markets can now get sellers to make concessions.

This respite in the market feels like a sensible entry point for some hopeful buyers. If rates fall later, we’ll see another refinancing boom — and so be it.

But to that point, mortgage rates are relatively high. So the most studious approach may just be the conventional wisdom: Compare housing markets if you can be flexible about locations. Compare rates from various mortgage companies simultaneously.

As always, note that some companies are advertising lower rates with mortgage points baked into those advertised prices. Those discount points have to be paid for up front. You might pay thousands of dollars extra at closing to get the advertised rate. These extra closing costs will make it harder to break even unless you’re already sure that you’ll keep the home you’re buying for many years.

Did you know? New research confirms prior studies showing links between homeownership and mental wellness.

When in Doubt, Zoom Out

It’s no picnic to have purchased after 2022, with a mortgage rate higher than 6% (as one in five people have), and to have seen your property value decline. As frustrating as that situation is, home appreciation is still the general rule for most people. Prices on homes have peaks and valleys in the short run, and yet home values rise over the long haul.

The “right” time to buy depends on being able to afford the payment, earning a stable income, and hanging on to the deed as property values grow. For a buyer who can do all that, the present time could be just right. But we can’t expect homes to pay for themselves in five years any more, the way a home perhaps did for those who had the luck to be ready in 2017 – 2019. A present-day buyer should consider the possibility that they might need to hold onto the deed for a decade to avoid losing value.

We all know that there’s only one way to build equity. Hold that deed! Buy a home you really like, and holding the deed to a home will be a pleasure. But it’s important that buyers understand that the break-even point shifting.

Important note: Use this article as general information only. At Deeds.com we do not provide financial or tax advice. Consult your financial adviser for personalized guidance when you feel ready to buy.