The X factor in the buy vs. rent equation: How long will you stay?

Reader poll: How long do you need to own a home for it to pencil out?

A home is the biggest purchase many people will ever make, and because home values can move abruptly in either direction, homebuyers are often advised to think of a prospective home primarily as a place. If it also happens to turn out to be a good investment, that’s icing on the cake.

Even when home prices march steadily upward, it still takes time to for homebuyers who have financed a purchase with a mortgage to recoup their investment.

Home as piggy bank image via Shutterstock.
Home as piggy bank image via Shutterstock.

Transaction costs — like mortgage origination fees and title insurance on the front end, and real estate brokerage commissions on the back end — can add up to 10 percent or more of a home’s purchase price. The way mortgages are structured, most of a homebuyers initial loan payments are going toward interest, rather than principal.

online poll by Opinion Stage

A homebuyer who has to sell their home too quickly can lose money — even if it has increased in value.

So homebuyers, particularly first-timers, are often advised to think about how long they will be able to stay put in a home. If the answer is less than five to seven years, renting might make more sense.

Most online buy vs. rent calculators are based on the assumption that a buyer will live in a house for seven years, Reuter’s Beth Pinsker reports in a “Your money” column.

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But Trulia Chief Economist Jed Kolko says that the average is more like 8.5 years. Ilyce Glink, publisher of, thinks that homeownership doesn’t start to look like a solid investment unless buyers are looking at staying put for at least 10 years.

With today’s shaky job market, that’s a time frame that fewer prospective buyers will be able to commit to with confidence.

What’s your advice to homebuyers who are considering whether they’d be better off renting?

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