The Five-Year Rule for Home Price Perspective
Headlines are saying home prices are starting to dip in some markets. And if you’re beginning to second guess your plans based on what you’re hearing in the media, here’s what you need to know. It’s true that both locally and nationally a few metros are seeing slight price drops. But don’t let that overshadow this simple truth. Home values almost always go up over time (see graph below):
Santa Clara County:
San Mateo County:
While everyone remembers what happened around the housing crash of 2008, that was the exception – not the rule. It hadn’t happened before, and hasn’t since. There were many market dynamics that were drastically different back then, too. From relaxed lending standards to a lack of homeowner equity, and even a large oversupply of homes, it was very different from where the housing market is today. So, every headline about prices slowing down, normalizing, or even dipping doesn’t need to trigger fear that another big crash is coming. Here’s something that explains why short-term dips usually aren’t a long-term deal-breaker.
What’s the Five-Year Rule? In real estate, you might hear talk about the five-year rule. The idea is that if you plan to own your home for at least five years, short-term dips in prices usually don’t hurt you much. That’s because home values almost always go up in the long run. Even if prices drop a bit for a year or two, they tend to bounce back (and then some) over time.
What’s Happening in Today’s Market? Here’s something else to put your mind at ease. Right now, most housing markets are still seeing home prices rise – just not as fast as they were a few years ago, and the increase may be smaller. This slow down in parts of the market are huge opportunities for buyers. Increased inventory equals more choice and less competition!
It’s important not to stress too much about what’s happening this month, or even this year. If you’re in it for the long haul (and most homeowners are) your home is likely to grow in value over time.
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