Why the Five-Year Rule Still Matters in Real Estate

If recent headlines about home prices dipping in select markets have you second-guessing your plans, it’s important to take a step back and consider the broader picture. While it's true that some metros are experiencing slight price declines, focusing on the long-term trends reveals a more reassuring story—especially when you apply the Five-Year Rule.

Understanding the Five-Year Rule

The Five-Year Rule in real estate is simple: if you plan to stay in your home for at least five years, short-term fluctuations in home prices usually won’t impact your investment in a meaningful way. Over time, home values have consistently appreciated, even if there are occasional dips along the way.

According to Lance Lambert, Co-Founder of ResiClub, “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.”

Today’s Market in Perspective

While price growth has moderated in recent months, the vast majority of housing markets are still seeing home values rise—just not at the breakneck pace of recent years. Even in areas where prices are softening slightly, the average dip is only around 2.9% since April 2024. That’s far from the dramatic declines seen during the 2008 housing crash.

And here’s the key takeaway: most of those markets have seen substantial price growth over the past five years. So even if prices have inched down recently, homeowners who bought years ago are still ahead—often significantly.

The Long View Still Wins

According to the Federal Housing Finance Agency (FHFA), home prices have risen 55% nationwide over the last five years. Every U.S. state has seen positive growth over that time. That’s why it's important not to get caught up in monthly or even yearly market shifts. If you're planning to buy or sell, thinking in five-year terms can help you make smarter, more confident decisions.

Final Thoughts

The real estate market is always evolving, but one principle holds steady: homeownership tends to pay off over time. Whether you're a first-time buyer or considering selling, the five-year rule can be a helpful guidepost for navigating today’s market with confidence.

If you’re thinking about your future and where you want to be in five years, now’s the time to connect with a trusted real estate professional who can help you create a strategy that supports your goals.