5 year rule

Focus on the "or more" part of the sentence. And your point is what W67 and others would make. It doesn't matter if your long-term view is 5 years or more, because if you're unfortunate enough to buy in the bubble part of the cycle, it may take 20+ years to recoup. When I read "740 Park", it struck me that some of the original co-op owners (who bought for less than replacement cost of bldg in a down part of the cycle) would have taken 20+ years to recoup transaction costs + inflation.

would suggest changing the logic to buying only if you're prepared for the possibility of a loss of your principal. to the extent that the realization of that loss is put off into the distant future, it becomes easier to rationalize.

i thought that it was 7 years. to refi and get a 1 point discount, it is considered repaid in 5 yrs.

the theory is that if you stay for that period of time and sell will a small increase per year (2-3%), your closing costs from the purchase and the sale will be covered. it is not meant to be used in the crazy markets that we've had in the past 10 yrs. if you purchased in 2000 and sold in 2007, you are gold. if you purchased in 2007 and will sell in 2014, i'd expect a failure to the rule.

Yes the logic is that it will take a few years for you to be able to break even after your transaction costs, in a normal market.

Another way, if you bought a $1M place and turned around and sold it for $1M tomorrow, you'd be at least $50k-$100k in the hole due to commissions, taxes, etc. To come out even, you would need the property to increase in value by 2% per year for 5 years, resulting in a property value of 1.1M. 2-3% is the typical benchmark for inflation.

But these are different times.

It's a function of amortizing your closing costs over a reasonable time period. The longer you stay, the more the monthly savings of owning over renting(we hope) can offset the high fixed costs at closing. Secondly long term housing has and will go up, but is more true the longer your horizon is, the more you shorten that horizon the less certain you can be that selling price exceeds purchase price.