The cost of buying a home has soared over the past few years with home values near record highs and mortgage rates higher than they’ve been in 20 years. New home buyers can expect to spend approximately 13.5 years in their house before they would be able to sell at a profit over the purchase, mortgage interest, and sale costs that went into the home.

Zillow’s analysis took into account typical home values and forecasted home value increases based on Zillow’s Home Value Index, and assumptions for closing costs, agent fees at the time of sale, home maintenance costs and interest payments. Estimates are also based on the current market conditions as of the time of the analysis (July 2023). [1] Varying down payment percentages and maintenance costs indicate different profit timeline durations. 

• A 3% down payment would require 13 years and six months to make a profit.
• A 5% down payment would require 13 years and three months to make a profit.
• A 10% down payment would require 12 years and seven months to make a profit.
• A 20% down payment would require 11 years and three months to make a profit.

The time it takes to make a profit on the sale of a home purchased today (data as of July, 2023) also varies greatly depending on the location. In metros with high home values such as San Jose (approximately 7 years) and San Francisco, California  (around 7.5 years), the timeline to make a profit on a sale is considerably shorter. These metros have a strong history of consistent growth, allowing homeowners to recoup their initial investment in a relatively shorter period of time if home values rise at the same rate they have risen historically. 

On the other hand, the metros where it takes the longest to make a profit on a sale are typically in more affordable markets. For example, new home buyers in Cleveland,  Baton Rouge, El Paso, Akron and Indianapolis could expect it to take at least 20 years to reach the profit point. This can be attributed to the slower historical growth rate in these such areas, indicating that it will take more time for home values to increase sufficiently in the future to build equity.

Longest Purchase-to-Sale Profit Times with 5% Down Payment (Including Interest Payments)

Shortest Purchase-to-Sale Profit Times with 5% Down Payment (Including Interest Payments)

As mortgage rates near 8% and home prices level off, it now takes longer to make a profit on a home purchase when considering the cost of interest. Still, homeownership offers lasting financial benefits because you can lock in a fixed mortgage payment, unlike renting where costs typically rise each year. The time it takes to recover your initial investment in a home can be extended and depends on various factors, including the current real estate market and your personal situation. Deciding when to buy or sell a home is a personal choice, and it involves assessing your long-term financial goals, the potential for your property’s value to increase, and your ability to manage mortgage payments.

Getting financing for your home is a crucial step in the homebuying process. Small fluctuations in interest rates can significantly impact affordability. Today, the difference between a $400,000 loan with a 5% mortgage rate compared to a 7% mortgage rate can be $500 a month, according to estimates from Zillow Home Loans’ mortgage calculator. On Zillow, you can assess affordability, explore financing options, and connect with a qualified loan officer to identify the best loan for your financial situation. 

NOTE: This analysis examines the estimated point at which a home seller makes a profit or does not incur a loss when selling their home considering all the costs put into it, from purchase costs, mortgage interest, and selling costs.

[1] This analysis assumed three percent closing costs at purchase, one percent home maintenance fees, and an additional six percent in closing costs and agent fees at the time of sale, and include all mortgage interest paid. Home values are assumed to growth at the rate of Zillow’s Home Value Forecast for the first year, then transition to the long run average home value growth rate until the end of the mortgage term. These assumptions are made to provide a comprehensive analysis of the time to make a profit from purchase to sale and should be viewed as general guidelines. Actual costs and market conditions may vary, and it is essential for buyers and sellers to consult with professionals and assess their specific circumstances when making financial decisions.