The Five-Year Rule for Home Price Perspective

The Five-Year Rule for Home Price Perspective

Some recent headlines mention that home prices are falling in certain areas. If that’s making you question your plans, here’s what really matters.

While a handful of markets are experiencing slight declines, don’t lose sight of the bigger picture: home values tend to rise in the long run (see graph below):

Many remember the housing crash of 2008, but that was an outlier, not the norm. The conditions back then—like loose lending practices, minimal equity, and too much housing supply—don’t reflect today’s market. So, when you hear headlines about prices slowing or dipping, it doesn’t mean another crash is looming.

What’s the Five-Year Rule?
In real estate, the five-year rule suggests that if you plan to stay in your home for at least five years, short-term price drops usually don’t impact you much. That’s because home values typically appreciate over time, even after temporary declines.

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.”

What’s Happening in Today’s Market?
Currently, many housing markets are still seeing prices grow—just at a more moderate pace than in recent years. In the few metros where prices have cooled slightly (marked in red on the graph), the average decline is only about -2.9% since April 2024—a far cry from the 2008 crash.

Even in those markets, home prices are still significantly higher than they were five years ago (as shown by the blue bars in the graph), meaning homeowners who’ve held on to their property are likely still well ahead.

The Big Picture

Over the last five years, home prices have climbed an impressive 55%, according to the Federal Housing Finance Agency (FHFA). That means even if you’re in a market where prices have dipped slightly—around 2%—you’re still way ahead in the bigger picture.

Looking closer at the data from FHFA, every single state has seen home values increase over that time (see map below). So, short-term fluctuations don’t erase the strong long-term growth homeowners have experienced nationwide.

That’s why it’s key not to worry too much about what’s happening in the housing market this month or even this year. If you're planning to stay in your home long-term (as most homeowners do), it’s likely to appreciate in value over time.

Bottom Line

Yes, home prices can fluctuate in the short term. But history shows that over time, home values tend to rise—especially if you plan to stay in your home for five years or more. So, whether you’re buying or selling, keep the five-year rule in mind and focus on the long-term benefits.

When you picture your life five years from now, does owning a home play a role in your vision?

Let’s connect and take the first step toward that future.