Is It Time to Downsize?

June 12, 2017

Last week I wrote about why my husband and I decided to upsize our home, so this week I’d like to take on its opposite: downsizing.

Downsizing — selling a larger home and moving into a smaller one — seems much more popular than upsizing these days. Mobile homes and RV trailers have been brilliantly rebranded as “tiny houses,” and there are hours of weekly television programming devoted to stories about families selling larger homes and moving into much smaller ones. In fact, my nine year old son, who is an avid fan of tiny house television, has been campaigning for us to move into a smaller home. (He is not likely to convince me.) However, you don’t have to go “tiny” to downsize. Any home that is going to be less expensive to own and maintain can be considered downsizing.

Why downsize?

Downsizing is a natural response to changes in your family needs and financial priorities. Downsizing to a less expensive and/or smaller home may be right for you if:

  • The kids are grown up and you don’t need that much space anymore;
  • You can’t afford the house you are in with its related costs while still funding other goals such as retirement, paying off debt or building emergency savings;
  • You want to move to a better school district but homes are more expensive there.
  • You are prioritizing financial independence over increasing your current lifestyle;
  • You seek a home that makes it easier to live in as you get older (e.g., single story, walkable neighborhood, etc.); or
  • You want to spend less time maintaining your home and more time enjoying life.

Downsize your costs without downsizing your space

I live in the New York City area, where housing is very expensive. A common topic of conversation between my husband and I, especially when paying property taxes, is whether we should sell our home then take the equity and buy the same house in a less expensive state. We wouldn’t have a mortgage, and all our related costs would be lower.

Our friends recently did just that. They sold their home in a neighboring town and bought a larger, yet less expensive home in a southern state – near a beach! It may be hard to move while you are building your career or putting your kids through school, but not so hard to do when you are empty-nesters like our friends.

Alternatives to downsizing

For new retirees, there are other ways to downsize costs without downsizing amenities. Here are a few ideas:

  • Co-housing: An intentional community with private homes that share common spaces and responsibilities, co-housing is a growing practice among seniors from the Flower Power generation.
  • Share your home: Many retirees are looking to share their homes, either by renting out rooms or apartments in their own homes, in order to reduce costs and have companionship.
  • Move overseas: Adventurous retirees are moving overseas in droves, to less expensive ex-pat friendly retirement destinations where the cost of living is lower but the lifestyle is pleasant.

Why stay put?

If your total housing costs (mortgage, taxes, insurance, utilities, maintenance) are 35 percent or less of your net income (income after taxes), there’s no need to rush to downsize. There are plenty of reasons to stay put for the time being:

  • You may like your current home and its size fits your family.
  • You like your neighborhood and schools.
  • Your home can be easily modified to “age in place.”
  • You want to stay near your grown children or aging parents.

Moving is a big decision and our sense of community is often connected to a physical location. If your housing costs are not breaking the bank and you’re not sure if it’s the right time to move on, it may make sense to stay put until you have a clearer idea of where you want to go and what makes sense for your goals going forward. You can always change your mind in the future.

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