It can take a long time for homeowners to find profits

If buying a home “works out over time,” how long must an owner wait until that purchase isn't a money-loser?

My trusty spreadsheet looked at Case-Shiller home-price indexes for Los Angeles-Orange County, San Francisco and San Diego dating to 1987. The average of this trio's performance was used as a benchmark for California housing values. Case-Shiller's U.S. index was tracked as well.

History says owning a home for at least 12 years yielded lossfree results.

The assumption was “works out over time” translates to no price declines in a given period. Let me start by using one-year ownership as an example.

California prices fell in 30% of the 12-month periods since 1987. Now owning one year did produce an average 6% gain — ranging from a 28% loss in 2008 to a 28% gain in 2004.

And, by the way, U.S. homes were down in just 18% of one-year periods.

So clearly one year isn't enough of an ownership length to be a “risk-free” purchase.

I won't bore you with every year's worth of results, so I'll just fast forward to what happened with four years of ownership.

Since 1987, owning a California home for 48 months had 27% losing periods. Not much of an improvement.

The average four-year result was a 27% gain.— ranging from a 38% drop through 2009 to a 94% surge through 2006. U.S. homes had 13% down 4-year periods.

Next, look at eight-year ownership. History shows 21% losing periods but an average gain of 61% — ranging from a 24% tumble through 2012 to a 214% upswing through 2005. U.S. homes had 14% down eight-year periods.

Even owning for a decade wasn't risk-free

since 1987. Over 10 years, there were still 9% losers — though the average result was an 80% gain. Worst was down 7% through 2016. Best was up 250% through 2006. U.S. homes had 5% down 10-year periods.

A Californian had to own for 12 years to have no declining periods since

1987. The average gain was 94% — ranging from up 6% through 2017 to up 240% through 2006. U.S. homes, too, had no down 12-year periods.

Bottom line

One could argue that the future won’t look like the past 36 years that featured a horrific market crash of the 2000s and housing malaise that ran for much of the 1990s. The purported shortage of housing might limit the

odds of such home-price calamities.

Conversely, the next 36 years will unlikely see home-price drivers such as stunning California growth — economically or population-wise — or mortgage rates going from double-digits to under 3%.

Yes, past performance is no guarantee of future returns. But those who ignore history often learn tough lessons.

P.S.: Using the same math on California Association of Realtors’ median home price, dating to 1990, it took 14 years for risk-free ownership. The average gain was 90% ranging from a 4% gain through 2020 to a 221% surge through 2023.