Why the Five-Year Rule Matters When Buying a Home
If you’ve been following housing market headlines, you’ve likely seen reports of home prices softening in a few cities. It might even have you questioning whether now is the right time to buy.
But before you second guess your real estate goals, there’s a powerful concept worth understanding: the Five-Year Rule.
This long-standing real estate principle offers reassurance and guidance—especially in times of market uncertainty.
The Five-Year Rule suggests that if you plan to live in your home for at least five years, you're far more likely to benefit financially from the purchase—even if prices dip shortly after you buy.
Why? Because home values tend to increase over time. While prices may fluctuate from year to year, real estate generally appreciates in the long run. That means short-term market changes are less likely to affect you if you stay put and allow your home’s value to grow.
As Lance Lambert, Co-Founder of ResiClub, explains:
“. . . there’s the ‘five-year rule of thumb’ in real estate—which suggests that most buyers can buffer themselves from mild short-term declines if they plan to own a property for at least that amount of time.”
Yes, some headlines are reporting slight price drops—but the national housing market remains strong overall. In a few major metros, prices are down about 2.9% since April 2024, but that’s a far cry from the housing crash of 2008.
And here's the kicker: even in those cooling markets, home values are still significantly higher than they were five years ago.
According to the Federal Housing Finance Agency (FHFA), home prices are up 55% over the last five years nationwide. That’s a massive gain for homeowners who’ve stayed the course.
Even more impressive? Every single U.S. state has experienced price appreciation over the past five years. So even if a local market is seeing a short-term dip, chances are those who bought five years ago are still well ahead.
That’s why the Five-Year Rule is so powerful—it gives you perspective that short-term changes often don’t matter in the long haul.
If you’re thinking about buying a home but are worried about short-term market shifts, consider this:
Do you plan to stay for five years or more?
Are you buying a home that meets your long-term needs?
If the answer is yes, short-term price fluctuations become far less important. Instead of trying to time the market perfectly, focus on your long-term goals—and let your equity grow.
The housing market is constantly evolving. But while short-term price dips may grab headlines, they rarely define your success as a homeowner.
By following the Five-Year Rule, you protect yourself from short-term volatility and position yourself for meaningful equity gains over time.
So if you're financially ready and your life situation supports it, now may still be a great time to buy—especially if you're thinking about where you’ll be five years from now.
📞 Have questions about your local market or whether now is the right time to buy? Let’s talk through your goals and build a strategy that supports your long-term success.
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