While “downsizing” from a larger home into a smaller one is largely considered a common practice for older adults as they determine the path to take in retirement, such a prospect may no longer be feasible — or for some even possible — in the current economic and housing climate. This is according to a column published at Money.com.
“With home prices up a jaw-dropping 19% in just the last year, downsizing isn’t as affordable — or profitable — as it once was,” writes columnist Aly J. Yale. “Which begs the question: Is there still financial gain in selling big and buying small?”
It’s still possible according to experts, but challenges in the current environment may change the dynamics of the decision. One major hurdle is the currently-high home prices observed throughout the country that make the prospect of buying a far costlier one than it used to be, and most markets do not currently have homes accessible for at or under $300,000, the column reads.
Locations like Florida, which tend to be popular with seniors, are seeing median home prices range from $450,000 in Orlando to over $620,000 in Miami.
“You’re arguably going to be selling at the top of the market, and you’ll get the most profit possible for the property you own today,” says Scott Lindner, national sales director at TD Bank to the outlet. “But on the flip side of that, while you’re looking to make your new, downsized purchase, you’re going to spend a premium for the property — even if it’s smaller.”
On top of that, smaller homes have a tendency to be competitive with large pools of interested prospective buyers. That competition leads to higher prices as well.
Inflation and macroeconomic factors also play into the equation, since higher gas prices and inflation also translate to higher moving costs.
“When you downsize your home, you may need to downsize your furniture as well — whether it’s replacing a sectional with a smaller couch or a king-sized bed with a queen-sized bed,” says John Fischer, enterprise lending executive at Bank of America to the publication.
Such things when paired with moving services, truck rentals or real estate fees add up quickly, he adds. Reverse mortgages are mentioned as one potential option to create cash flow, presuming a senior would benefit and can qualify.
Read the column at Money.com.
