When is it Time to Downsize?

Tight smaller-home inventory and challenging financial circumstances can make downsizing a difficult decision.

Twenty-eight percent of real estate sales in 2020 were considered a downsize, according to Lawrence Yum, chief economist at the National Association of Realtors, in a recent Wall Street Journal article.  And most downsizing buyers are age 55+.

Initially downsizing may seem like a great way for seniors to lower housing costs and lessen maintenance responsibilities--and a simple choice—but the decision to downsize may not be that easy.

For those who haven’t paid off the mortgage, today’s higher buying prices mean selling to downsize could unfortunately equal bigger monthly payments on a smaller home.  One interesting fact: the number of debt-ridden older homeowners is up to 55.4% in 2019 from 2007’s 33.2%--due in large part to mortgage debt.  Downsizing, then, is not necessarily reducing housing prices.

Meanwhile, millennials compete for the same homes.  Many of them do not already have properties to sell, creating a difficult situation for seniors needing to sell before they can downsize.

“Bidding wars have left young Americans struggling to buy their first homes and reap the benefits of rising home values.  At the same time, retiring Americans who can’t keep up with starter homes’ surging prices are staying put in their properties,” says the article.

Some boomers, however, do not have as challenging financial circumstances and can absorb recent price hikes in smaller homes. 

And other housing options exist for seniors considering a downsize, too, like moving in with a relative, residing in independent living communities, and renting.

Still, the choice to downsize can remain a challenging one to make.  A redfin.com blog post suggests that homeowners experiencing these issues might be ready to move:

·         Housing expenses are up beyond 30%--typically, smaller homes mean smaller expenses, but any homeowner whose housing budget exceeds 30% of income is considered financially burdened.

·         Home maintenance is challenging.  Features like stairs, large landscapes to keep up, and narrow doorways may be difficult for older homeowners.

·         Many rooms in your home are unused.  Why pay utility bills for empty spaces?

·         You can live anywhere.  A move closer to friends or family, or a place with lesser cost of living may inspire a downsize.

Are you ready for a downsize?

Post authored by Lora Bray.

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