Skip to content

What Is House Hopping? Its Meaning and Why It’s Making You Broke

It’s one of the biggest myths in America today: Hopping from house to house will increase your happiness, your stature, and your wealth. Totally not true. It sounds all well and good, but in reality, house hopping often leaves home owners more worried, more insecure, and more broke.

Note: Want to get out of debt? Want help lining up your loans and calculating how quickly they could pay off? Check out our top-selling Debt Snowball Excel Calculator for just $9.99 on Etsy!

What Is House Hopping?

Okay, so before I get too far, I should probably let you know what the heck house hopping is. Apparently it’s a term I came up with myself because I can’t find hardly anything on the topic, but it’s basically the act of buying a house, living there for a couple of years as it increases in value, selling it, and then buying a more expensive, larger house with your new beefy down-payment (that you got from selling your old house).

house hoppingFor example, Jon and Julie have been saving up in order to buy their first house. After a few years of strict budgeting, a ton of work, and a few fights, they finally save up the down-payment. They’ve got $15,000 and take the exciting leap into home ownership with a $150,000 home purchase. They live there happily for two years and discover that the house is now worth $170,000. Since the excitement of that home had worn off a few months ago (and they had been talking about upgrading soon anyway) they decided to put the home up for sale. Sure enough, they find some interested buyers and sell the home for $165,000. Now they have $30,000 (their initial $15,000 down-payment and their $15,000 gain on the sale of the property) and start looking for the next house. Because they have a larger down-payment and have good credit, they are able to find the house of their dreams: a $300,000 executive home on a lake. They buy it immediately.

This is the epitome of house hopping. Trading up one house for another and building equity along the way, thinking that it’s making you rich because you continually have a larger and larger down-payment. All the while, actual rich people are passing you by and you just can’t figure out why! Let’s figure out why house hopping is making you poor, and why it’s DEFINITELY not making you rich!

Why House Hopping is Making You Poor

In the example above, it seems like Jon and Julie have earned $15,000 on their home sale, but have they really? Ummm, no. Not even close. Let’s take a look at their expenses during the two years of ownership:

  1. Closing costs – when they first bought their house, there were closing costs (fees paid to the bank to process your loan) of $2,700.
  2. PMI (Private Mortgage Insurance) – Since Jon and Julie only put 10% down, the bank will charge them PMI which will cost them an extra $20 a month (after 2 years, $580).
  3. Interest payments – In the first two years of ownership, Jon and Julie paid far more in interest than in principal. In fact, in those 2 years, they paid $10,620 in interest and only paid their mortgage down by $4,850.
  4. Property Taxes – Over the two years, they dropped another $3,900 in property taxes
  5. Home Repairs – With home ownership comes repair bills. A new furnace, carpeting, an updated kitchen – all of these cost money. According to About Money, homeowners can expect to pay 1% of their home value each year on repairs. For Jon and Julie, this means $1,500 per year, or $3,000 total.
  6. Realtor Fees – Most homes are sold by realtors (and I actually believe there is value in doing this – another topic for another day), which typically comes at a 6% cost to the sellers. With a sale price of $165,000, a fee of $9,900 needs to be paid. Ouch!

Okay, I just threw a TON of numbers at you. Let’s simplify:

  • Closing costs: $2,700
  • PMI: $580
  • Interest: $10,620
  • Taxes: $3,900
  • Repairs: $3,000
  • Realtor: $9,900
  • Total Cost: $30,680

So are you making any money by house hopping? Absolutely not. Jon and Julie thought they had earned $15,000 by selling their house, but they actually lost $15,000. Not a smart move on their part. After looking at these costs, it’s pretty easy to see why house hopping is keeping people broke.

House Hopping is Keeping You From Becoming Rich

Forgive me, but I just can’t stop there. Not only is house hopping causing you to stay broke, but it is actually keeping you from becoming rich!

So yes, it’s true that there are expenses to upgrading houses every couple of years, but there are other factors at play as well. And quite honestly, I consider these factors to be more of a detriment than the costs outlined above.

house for sale1) Inflating Your Costs

Everyone has all these dreams of owning a bigger house. You know the kind, the one with 5 bedrooms and 4 full baths… the dream of a family of four…. Does that make any sense at all? To me, it certainly doesn’t, especially when you factor in the costs of the upgrade.

As we stated earlier, a family can plan to spend 1% of your home value each year in repairs and maintenance. The bigger the house, the more maintenance it needs, the greater the cost. Property taxes increase, the mortgage payment increases, and your costs increase if you ever want to sell it. Basically, by upgrading your house you are severely increasing your monthly costs. And, chances are that your income didn’t really increase that much since your last house. You just had a bigger down payment this time.

2) Selling at Wholesale, Buying at Retail

When you sell your house and pay the Realtor fees (and possibly the closing costs), when it’s all said and done you are making nowhere near the market value of your house. It’s basically like selling your home at a wholesale price.

For many of us that buy, however, we are looking for the house that is completely remodeled and move in ready. For those types of houses, you’ll always pay retail. When factoring in the costs of selling and buying from this perspective, they are through the roof (pun fully intended, ha!).

3) Hurting Your Cash Flow With Each Upgrade

When you are actively house hopping, you are typically upgrading to a nicer, larger house, which almost always means a larger mortgage payment. With moves like this, your cash at the end of each month gets smaller and smaller. And, with less cash means less chance to invest, which is clearly hurting your ability to get rich.

Note: Want to pay off your mortgage? Want to pay it off in 10 years? 7 years? 5 years? Find out how to do it and actually SEE how it works with this tool, The Early Mortgage Payoff Calculator, currently on Etsy for $9.99.

But Isn’t My House an Investment?

I used to think that my house was an investment. After all, as the years went by my equity increased and the value of my home typically increased as well, which therefore improved my net worth. While this is true, when factoring in all the expenses of a home, it’s pretty much like investing your money in a money market account at 0.8%…a pretty crappy return.

The rich do not consider their home to be an investment. Instead, it’s merely a nice place to stay when they’re not out working hard on the next big business deal. According to “The Millionaire Next Door”, the rich definitely aren’t fans of house hopping. In fact, they typically reside in the same house for 20 years at a time!

To further prove my point, take a look at the chart below. While the middle class put over 63% of their net worth into their house, the rich only put 9% of their worth in theirs!

house hopping

If you’re interested in becoming wealthy, put your house hopping aspirations behind you. Instead, stick around in your current house, pay down your debts, and invest your extra money in the market, business ventures, and/or rental properties. These will likely give you a far better return than your house ever will!

Do you know of any house hoppers? Do you agree with my standpoint on this?

Housing Make Money Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. My wife knows a family, who while she was growing up, would move every couple of years, just because they liked having different houses. While they seemed to do OK because this was before the housing market crashed, you could see that a lot of potential wealth evaporated along the way. I think moving here and there is fine if you have a specific reason, like having a new location, or needing a different home size, or the like, but if you’re just moving for the sake of moving or trying to ride the wave of increasing home prices, then you will likely have a hard time in the end.

    • Even with an increase in housing value, you’re still going to end up paying a ton more to move. Sure, the house you sold went up in value, but so did the one you’re about to buy! So it’s not like you’re getting any kind of a deal on the next house. I agree with you – moving is fine, but it shouldn’t be done in efforts to earn money.

  2. I think for the most part, it’s smarter to stay put, but I can also see reasons why people would house hop. We know lots of people in education administration that end up moving every few years. Is it smarter to rent and never own, or buy a below market house and sell for a profit? I’m not sure where I’d stand if we were in that spot. I also know some builders who house hopped their way into not having a mortgage after a few swap ups, but that means they did all the renovation work themselves. If you don’t have a reason other than wanting a bigger house, then it’s probably not a good idea.

    • Yeah, if your career requires you to move often, then I could see that. Honestly though, if you know you’re going to move again then it might be a better idea to just find a cheap rental. I know it seems like you’re pissing your money away on rent, but in the long run it can actually be cheaper, especially if you’re on a quest to find a cheap apartment.

  3. Did you mention moving costs? That’s a huge expense, not to mention the emotional toll everyone goes through while moving.

    • I did NOT mention moving costs. Yup, there are more expenses there as well. It’s no wonder why the rich just stay put in their homes for 20+ years.

  4. I think the mortgage and realtor fees are what really take a bite. Maintenance you would have to do on any home, same with property taxes. But those transaction costs around real estate transactions are exactly why financial pundits always say not to buy a house unless you plan to be in it for several years. The longer you stay, the smaller percentage it costs of any profits you make.

    • But maintenance AND property taxes will increase if you’re buying a larger, more expensive home. Very true what you said though – the longer you stay in a house the cheaper it is for you. Thanks for the comment Jack!

  5. I think the one thing that this analysis misses is the fact that Jon and Julie would have had to pay to live somewhere. You also don’t pick up the tax advantage of the interest paid on the loan.

    Not saying that I disagree that house hopping is not a good idea. Just that I think your math is a little flawed. My guess is that it would probably be closer to a break-even deal.

    • Oh that fricken tax advantage – the absolute dumbest reason to buy yourself a house. Sorry, pet peeve of mine. Anyhow, those that love to house hop and continually upgrade their living are most definitely not breaking even compared to those that stay put – mainly because they never give themselves time to start building real equity in their home. They stay just long enough to pay a butt-load of interest, but barely anything on the principal. Then they move on to the next house and do exactly the same thing. If you want to be wealthy, find a house that you like, stay put, and then use your excess cash flow to invest in something other than your primary residence. Thanks for the comment Gen Y, I really did appreciate the differing perspective…even if I do seem a bit crabby with my response… 😉

  6. My wife and I were just talking about this. We are going to have to move eventually because our house won’t handle the size of our family. When talking about where to move to, I was saying how I want our next house to be our “final” house. I just don’t get the idea of constantly moving/upgrading. I want to move once and be done with it so I can focus on paying off the mortgage and being completely debt free.

    • Yup, it seems that most wealthy people buy themselves a starter home, grow out of it, and then buy their next home that they end up living in for life. Sounds like you’re on the road of thinking like the wealthy! Thanks for the comment, Jon!

  7. Everywhere I’ve sold a house, there are transfer taxes as well. They typically end up being somewhere around 1%. I agree with you, it appears like net worth is going up because of the equity increase but if you were following strict accounting you have to assume a sale at some point, so there is the embedded liability of all these future costs that are inescapable. Add those in, and your projection of a money-market-like return is pretty accurate. Renting is a better financial option a lot more often than people think. If you add in the opportunity cost of not getting a better return on your capital elsewhere instead of having it tied up in the house the argument assumes a little more risk but is even more tilted towards renting. Counterintuitive perhaps but math doesn’t care about intuition :-).

    • Thanks for the comment, Mike! I absolutely agree with you on your entire comment. I used to think that renting was a poor option, but if you know that you will likely move often then it can really save you a ton of money (especially if you are wise and keep your rental costs low)!

  8. When we were selling our property last year our real estate agent told us that it’s a good idea to live in the property for at least minimum 5 years. He mentioned that transaction fee will take about 5% of the sell value, so house hopping will make you less rich if you do it often.

    • Your real estate agent is spot on. I used to think that they said that because your house needed to appreciate, but really it’s just to cover the costs of selling!

  9. I tried to buy a great family house across from a park when I moved across the country for work as few years ago, hoping that would make it easier for me to sell. 4 years later I am married with 2 kids and its the perfect size!

    I don’t want to pay extra costs to move or sell the house (also add the money you spend to clean up and fix little problems before putting on the market).

    • Perfect! So now it’s time to get that house paid off, right?! 🙂

  10. I agree and disagree with what you have written.

    House hacking has done very well for my wife and myself. We have moved up in house size but generally we move laterally. We buy fixer uppers for well below market value, renovate and move in. The latest house has 150k equity with no appreciation. Stay in the house for 2 years and take the sale profit tax free. 2-3 moves and we have a free and clear home. We make money to live. I see many immigrant families in our area doing the same thing. They have the renovation know how and can make decent extra income by fixing up and moving every few years.

    For most people, your right, they simply do not calculate the cost of sales, moving, setting up the new house etc.


    • Hi Jason. Yup, fixer-uppers are the exception. I bought a foreclosed fixer-upper house for $75k and could probably sell it for $115k today (3 years later) and would clearly make a profit. But, there was a ton of time and effort put into adding that value to my house (that comes at a personal expense, not necessarily a monetary one)! But, for those that pay full-price for their homes and upgrade every couple of years, they are clearly losing. Thanks for the comment Jason!

  11. Closing costs here in Australia are ridiculously expensive! 3% stamp duty is charged to the purchaser, with no benefit received at all.

    A $500,000 apartment (an average price in Sydney) would result in a $15k stamp duty fee. House hopping is useless unless you can easily recoup these expenses.

    • Stinkin fees! They are definitely killer, no matter where you live. Stick around in your house for as long as you can Mr Ikonz. You won’t be sorry you did!

  12. The stats show people move every five years! This is a good example why we plan on staying in our home a minimum of 15 yrs!

    • I’m actually surprised people stick around for that long. I would have figured the average person would move ever 3 years or so. But still, if you’re not staying for 15 or more, then you’re probably costing yourself a TON of money. Thanks for the comment, Robert!

  13. It is always not only the revenue part which attract people to towards house hopping. Few people want to change their atmosphere and houses after a certain period of time as this what they love to do. This will help people to understand the whole matter clearly. Thanks for sharing.

  14. Good thing about my country is that people usually stick to one house only. We get an apartment and maybe ‘upgrade’ to a house. Most of the time, if the family has a house, they’ll stay there at least for a generation.

  15. So few people truly comprehend the transaction costs of purchasing a house or selling a house until they are directly confronted with them. Then, like you’ve pointed out, they categorize them differently, mentally, than they do the equity portion that they have built up. It is too bad that the costs are frequently obscured until you are right in the process.

    • Right on, Marie. I remember my parents going through the same thing when they were selling their house many years ago. They had a number in their head for what they were willing to accept, but due to realtor fees and other costs, their bank account experienced a much lower deposit from the sale of that house. I’ve been in my house for just over 3 years now. I think I might just want to stick around for a while! 😉 Thanks for the comment!

  16. Interesting post and I see this happening all the time. Although we don’t have stamp duty or capital gains tax in New Zealand the cost of transacting real estate is still high.
    We bought what might be called a ‘starter’ house and plan to live in it until we die. We’ll probably convert the attic/loft so we have an extra living space but other than that I don’t see why we’d need to move.
    I’m pretty sure the real estate industry coined that ‘starter house’ term so people would always feel they were only on the first rung of the property ladder and it was expected that they move up.

    • Great comment Emma! I plan to stay in my house for quite some time as well! At the moment, it’s just me. Soon, probably two of us. And as for a family – we could have 2 kids before I would even start to feel cramped! I think we’re good for quite a while. 🙂

  17. My husband and I know this all too well. The closing costs and the selling costs will get you every time! Not to mention that moving from one home to another means that you are constantly paying movers to move your items. We all know that adds up very quickly.

    • Yeah, house hopping can really cost you some bucks! It’s time to find your house of choice and stay there for a while. Then, you can start to focus on your building your net worth uninterrupted!

  18. I completely agree with you. Staying put and investing in property is wiser than hopping, what is more it is impossible for someone to save money from hopping from house to house. It’s best to invest in maintaining and renovating.

    • Exactly! And speaking of renovating, it’s also much wiser financially if you can renovate yourself (without the help of professionals)! My neighbor came over the other day all proud because he talked his window guy down to $7,500 to replace all his windows. I’m doing mine on my own this year for $2,500. That’s a huge difference!

  19. What if you purchased a home and paid it off in full within 5-7 years, and used that to “house hop” into a bigger home. Would it be a better decision then? Or if you put 50% down?

    • Once I get out of debt, I vow to never go into debt again. If you paid off your house within 5-7 years, then I bet you could save up enough to buy the next house with cash, even if it is quite a bit bigger. That’s what Liz and I plan to do. Sure, it will take another few years, but it’ll be worth it to never give the bank another cent of my money!

  20. it’s not the method of finance though technically, borrowing from the bank at tax-preferred 3% and earning higher returns elsewhere if possible is actually better than paid off if you can accept cashflow risk. The real problem is that real estate transactions are exceptionally high friction. You’ll lose a few percent going in (3-8% maybe depending on rehab needs and your ability to resist purchasing things for the new home), and you’ll lose a bunch going out (8% or so in my experience – 1-2% to prep for sale, 3-6% real estate fees (usually 5% now), 1-2% transaction taxes depending on jurisdiction plus you have to move some where (a cost) plus it takes a lot of time which you could have done something useful with (opportunity cost). House hopping is a very expensive way to use real estate as a financial vehicle.

    In it’s defense, if you can house-hop your way right next to a job such that you have a walkable commute and a walkable life (such that you can get rid of a car and get your time back) it is likely the right move. Same if you can take an energy-hog of a house and hop in to one that is nearly passive. Both of those could be net wins but the real lesson is to bust out the calculator and do all of the math.

    If you can ask a money question you can likely answer it if you do the math but you have to buckle down and do it!

    • You’re right Mike. There are many instances where moving is just too expensive! There are others though that make sense. If you want to grow wealthy in your home, you ultimately need to learn to stay put though.

Comments are closed for this article!

Related posts