How Many Years to Stay in a New Home Before Selling It
Real estate agents often suggest the “five year rule” when asked how long someone should live in a new home before selling it. However, when it comes to deciding how long you should remain in a home, why you wish to sell could be as important as whether you should.
Expanding Out
According to a 2011 study conducted by the American Housing Survey and published by the National Association of Home Builders, the average buyer is expected to stay in a single-family house 13 years before moving. First-time buyers tended to stay in their homes 11 years, four years fewer than buyers who previously owned a home. First-time buyers also tended to be younger. These buyers are far more likely to move than those who have “traded up.” They also are more likely to have purchased a starter home.
Trading Up
Starter homes may lack the bells and whistles buyers seek. People purchase these homes as a stepping stone toward the dream house. The key to trading up is having enough equity in the starter home to cover the down payment and other costs of buying a new house. Buyers usually are asked to put 20 percent down on a conventional loan. However, if you have paid down the principal of your mortgage and your personal finances allow, it’s OK to trade up before five years.
Cashing In
Homeownership is an investment. However, the days of purchasing a house and flipping it for cash in a couple of years ended when the housing bubble burst. These days, it will take a bit longer to accumulate enough equity to cash in on your investment. Closing and listing costs are just two considerations. This is when the five year rule makes more sense. Unless you plan to pay down your principle sooner, you’ll need at least five years to build up enough home equity to make selling worthwhile.
Staying Put
Sometimes, an uncertain economy or changes to your income may impact how long you stay in a house. Financial difficulties may keep you in a home, even if your family is expanding and you desire to trade up. You may be equity-poor. This means you have less than 20 percent equity in your home. Tack on closing and moving costs and suddenly a so-called trade up looks more like a financial step down. Staying put longer, to build up more equity, could contribute to increased financial stability.
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