Real Estate: If You Buy a Home in One of These Cities Now, You Won’t Turn a Profit for Over 20 Years
Written by
Yaël Bizouati-Kennedy
Edited by
Daria Uhlig
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With low inventory, record high mortgage rates and prices on the rise, it’s no secret that buying a home has become not only nearly impossible for many Americans, but also extremely expensive.
As of Nov. 2, the average 30-year fixed mortgage rate stood at 7.69%, according to Mortgage News Daily data.
And now, a new Zillow analysis found that new homebuyers 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.
In some cities, that timeframe jumps to 20 years or more for homeowners to be able to make a profit.
“The estimated time before a homeowner would be able to turn a profit is projected to be shorter in many relatively expensive markets because they have seen consistently strong growth,” said Nicole Bachaud, senior economist at Zillow.
Bachaud added, however, that regardless of how long these projections show it will take before a homeowner would be able to sell for a profit, it’s important to note the many benefits of homeownership this analysis does not account for, and also the opportunity cost of renting otherwise that is not included in this analysis.
“Homeownership is the biggest avenue for long-term wealth building for many households, and the fixed payments from a 30-year mortgage insulate households from annual rent increases that can make financial planning a challenge,” she said. “In this expensive market, it’s crucial to find the right home that will fit a buyer’s needs for years to come.”
The Zillow analysis took into account several factors including typical home values and forecasted home value increases, assumptions for closing costs, agent fees at the time of sale, home maintenance costs and interest payments, as well as varying down payment percentages and maintenance costs.
These are the cities with the longest purchase-to-sale profit times with 5% down payment:
- Cleveland, Ohio: It will take you 22 years and 10 months from purchase to sale to make a profit.
- Baton Rouge, Louisiana: It will take you 21 years and six months from purchase to sale to make a profit.
- El Paso, Texas: It will take you 21 years and four months from purchase to sale to make a profit.
- Akron, Ohio: It will take you 21 years and three months from purchase to sale to make a profit.
- Indianapolis, Indiana: It will take you 20 years and nine months from purchase to sale to make a profit.
And these are the cities with the shortest purchase-to-sale profit times with 5% down payment:
- San Jose, California: It will take you six years and 11 months from purchase to sale to make a profit.
- San Francisco, California: It will take you seven years and six months from purchase to sale to make a profit.
- San Diego, California: It will take you eight years and two months from purchase to sale to make a profit.
- Los Angeles, California: It will take you nine years from purchase to sale to make a profit.
- Miami, Florida: It will take you nine years and one month from purchase to sale to make a profit.
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