In 2008, after the United States had emerged from the housing crisis, homeowners began a new trend — they stayed put in their homes longer. At the beginning of 2019, that timeline had extended from about seven years to a median duration of just over 13 years (with variations in certain cities). It was the fallout of a perfect storm — rising interest rates, limited inventory, low foreclosure rates, and tight credit. For prospective homeowners today, understanding the significance of thirteen years in real estate here in San Francisco or across the country has its advantages.
A Thirteen-Year Range
It’s all too easy to focus on the value of a home today, right this minute, especially if you’re about to pony up the down payment. But it’s more useful to consider its potential value down the road — not next year or the year after, but a good thirteen years from now. Why? Simply because valuations will always dip and rise. But looking at the recovery rate of the dips, it’s evident that most home prices recover within three to five years. Over a more generous thirteen-year period, they’re certainly doing well.
As a potential buyer, keep in mind that shelter is an essential. You have to live somewhere, and if you aren’t paying a mortgage, you’ll be paying rent. That’s manageable in the short term, but thirteen years of renting is problematic. In that timeframe, you’ll have paid almost half of a 30-year mortgage! Plus, there are significant tax advantages to homeownership, like the $750k mortgage interest tax deduction and the capital gains exemption.
Consider too the life changes through which we cycle over thirteen years. It represents roughly 25% of the average adult life, and as we age, our homes tend to serve as the single stable element over the course of a lifetime. It may not make you a fortune, but most homes retain their value at the least or increase in value close to the rate of inflation (or better).
It’s not always easy, but focusing on the long-term is usually the wisest course of action. The roller coaster of quarterly, annual, and even three-year cycles is simply not reliable. This is when an experienced real estate agent shines, and I’d love to share my insight if you’re buying or selling in San Francisco.