The house-hunting process can be daunting and requires a great deal of time, money, and research. Mortgages can be a multi-decade financial commitment, so identifying the most critical factors upfront is the best way to set yourself up for success.
Financial expert Dave Ramsey reveals the pitfalls all first-time homebuyers should avoid and explains a key part of the homebuying equation that is often overlooked.
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The current value of a home and its potential resale value together determine the return on your investment when you’re ready to sell.
However, there are a few things buyers should be cautious of when researching neighborhoods and going to house listings. Ramsey explains more below.
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Location is key to getting the best return on investment
Housing markets vary geographically, and a house’s value is impacted by demand, inventory, neighborhood, and proximity to cities. Researching an area and choosing the right location is one of the best ways to predict how a home’s value will change with time.
“Your new home’s resale value may not seem important now, especially if you think it’s your forever home,” Ramsey wrote. But here’s the reality: Most homeowners only stay in their home for ten years.”
The average 10-year return is 57% on home prices in the U.S., but that number varies by city and state. A home that costs $442,500 would appreciate to $694,275 after just ten years, an almost $250,000 gain.
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However, choosing to buy a home in an area near a highway or with high crime rates could bring down the home’s value in the long term — and may impact financial goals like retirement planning.
“The biggest key to picking a home that’s likely to grow in value? Paying attention to the entire neighborhood,” he continued.
“For example, you don’t want to buy the most expensive home in the neighborhood. Instead, choose a home that’s in the bottom price range of its neighborhood—those houses are more likely to be worth more in the future and sell more quickly.”
Time is the best way to beat housing market volatility
While home prices can be volatile in the short term, value appreciation is typically positive and more predictable in the long term. Austin, Tex, for example, experienced a massive pandemic housing boom, but prices per square foot have since fallen 9%.
Massachusetts, California, and New York have seen the greatest home appreciation rates over the past ten years. However, homes in these areas tend to be more expensive, which may not be the most affordable option for first-time buyers.
Realtor.com senior economic analyst Hannah Jones explains why staying in a home for at least five years is the best way to avoid market fluctuations and ensure a positive return on your investment.
Related: Dave Ramsey reveals major 2025 mortgage rate prediction
Given these variations, this might be why 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,” she said.
“While it’s not a strict rule or guarantee, properties typically appreciate in value over five years. This also allows homeowners to build equity and recoup the one-time transaction costs.”
Jones’ insights align with Ramsey’s main point: location is key in determining a home’s resale value, but staying in a house for a minimum of five years — and ideally ten — will give you the biggest payoff when it comes time to sell.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
