Indianapolis homebuyers could wait decades to break even
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If you're going to buy a house, be prepared to stay long-term — or lose money.
State of play: The double whammy of high interest rates and record-high home prices means it could take decades to break even on a purchase made today.
Why it matters: The pendulum has swung toward renting as the most cost-effective housing choice, at least in the short term.
By the numbers: It can take up to 21 years to break even on an Indianapolis-area purchase, per Zillow data exclusively shared with Axios.
- That's when buying a $273,000 home with a 3% down payment.
- A traditional 20% down payment gives you an 18.7-year break-even horizon, per Zillow.
💭 My thought bubble: This is a good time to purge your brain of the idea that homebuying is an investment.
- Instead, think of housing as a very expensive consumer good — more like a car.
- A clear-eyed buyer chooses a car based on whether they like it and can afford it, without any expectation of a future return.
- Approaching homebuying like this can help you stay sane.
Zoom out: Chicago and Cleveland are the only other large U.S. metro areas where it would take 20 years or longer to break even on a typical home purchase, per Zillow.
- The shortest break-even period is between six and eight years in San Francisco, depending on down payment size.
Context: Historically, experts have said you need to stay in your home for at least five years to break even.
- In recent years, home purchases have often turned profitable within months as prices skyrocketed.
- Now, with mortgage rates bouncing between 7% and 8%, new homeowners will need to stay put far longer to avoid going underwater.
Yes, but: There are exceptions to these timelines based on many factors, including location, home features and future refinancing opportunities.
- Cash buyers are still flipping homes in Indianapolis, albeit at a slower rate than in recent years and at reduced profits, per real estate data firm ATTOM Data Solutions.
Plus: Most Indianapolis-area sellers are still doing very, very well.
- Sellers reaped a median capital gain, or profit, of $118,000 on homes sold between August and October, per data Redfin shared with Axios.
The big picture: U.S. homeowners are sitting on record-high equity after more than a decade of price growth.
What we're watching: An increasing number of sellers are losing money, though.
- About 2% of Indianapolis-area sellers lost money between August and October, up from 0.93% during the same period a year earlier.
- The median loss was $31,500.
Between the lines: As more recent buyers decide to sell, losses likely will become more common.
The bottom line: Whether it's a "good" or "bad" time to buy a house depends on your circumstances and expectations.