Finding a smaller, more economical place to live can liberate you from costly expenses, inaccessible layouts, and several days worth of dusting, cleaning, and lawn mowing. And as mortgage rates rise, many are choosing to downsize their current homes for accommodations that are more compatible with their lifestyles, incomes, and individual needs.1
In fact, the Zillow Group Housing Trends Report found that 46% of Baby Boomers who sold their homes did so in an effort to downsize.2
If you’re considering capitalizing on the current housing market and downsizing your space, we’re exploring the top signs that it may be time to list your home and begin your next house search.
What To Consider Before Downsizing
There are a lot of unexpected benefits of downsizing your home, but, ultimately, downsizing your home will likely lower your housing costs.3 If you’re experiencing high mortgage expenses, pricey homeowners insurance rates, and rising property taxes, transitioning to a smaller space may relieve the financial burdens of a larger home.
In addition to monthly expenses, you must also consider your unique needs: Seniors and older adults who are homeowners often experience mobility constraints that can make multi-story homes largely inaccessible.4 For those still wishing to live at home, downsizing to a smaller house may allow older individuals to:
- Maintain their independence
- Limit maintenance and cleaning tasks
- Live in an accessible community
But Baby Boomers aren’t the only generation downsizing their homes. Gen X and Millennials downsize, too—although not always for the same reasons. Largely, younger homeowners downsize in an effort to save money or move closer to family and friends.5
That said, downsizing your home does lend itself to less space, and consequently, less privacy. If you’re the parent of a troop of teenagers or the partner of a work-from-home whiz, consider whether the needs of each family member will be met in a smaller home. Specifically, whether lower housing costs outweigh the costs of the occasional bout of tension in the family home.
Additionally, you must consider the expenses that come with the downsizing process. This may include undergoing household renovations to increase your home’s value, renting a storage space, and paying closing costs, which can be between 8–10% of the sales price.6
Fortunately, downsizing homeowners can often avoid unexpected costs by researching the market before listing their property and saving for additional costs associated with selling and moving into a new home. If you’re relocating to a retirement community, you may also come across parking fees, maintenance fees, and/or amenity fees.
6 Signs It’s Time To Downsize Your Home
Determining when to downsize your home often depends on your personal lifestyle, finances, and location needs and preferences.
That said, a few signs may indicate it’s time to shrink your space.
#1 Your Monthly Housing Expenses Have Risen
Per the United States Housing Authority (USHA), your housing expenses should not comprise more than 30% of your monthly income.7 For example, if you’re earning $9,000 monthly, no more than $2,700 should be spent on mortgage, insurance, maintenance, and tax payments.
If you find that monthly household payments impair your ability to buy essential items, such as food, gas, and medical care, it may be time to consider downsizing your home. While job loss, salary cuts, and retirement can affect homeowners’ ability to afford their homes, these situations aren’t the only reason to consider downsizing your home to cut costs.
Even those with job security may find themselves overburdened by housing costs, particularly if they’re looking to save money in the long term, travel frequently, start a family, or begin luxury household renovations.
That said, downsizing at any stage of your life is a viable option if you’re looking to downsize your home ownership expenses, too.
#2 You’re Finding It Difficult to Maintain Your Property
Those who are older and those with mobility issues may find home maintenance, especially for a large home, difficult to maintain. From cleaning and lawn mowing to fixing minor repairs and painting, everyday tasks can be physically demanding—and, let’s face it, a drag to complete.
While homeowners can hire lawn services, handypersons, and cleaning contractors to manage household tasks, it can be costly. That said, when housework becomes too overwhelming, expensive, or difficult to complete, it may be time to downsize your home.
To ensure your home’s value doesn’t deteriorate alongside its 15-year-old paint, consider listing your home on the market quickly after you determine you’re unable to upkeep the home’s external and internal integrity. Outdated appliances, poorly maintained hardwood floors, and overgrown yards can significantly impact a home’s curb appeal, thus decreasing buyer interest.
Once you’ve listed your home, you can begin to look for housing options that provide outdoor and indoor maintenance services, such as:
- Retirement homes
- HOA condos or townhouses
- Apartment complexes
#3 You Have Empty or Unused Space
Once your little birds have left the nest, their bedrooms—once filled with walls of posters, shelves of books, and a pile of clothes that just wouldn’t go away—are often tucked away and left unused.
While your grown children’s untouched bedrooms are filled with memories, empty spaces can unnecessarily increase housing costs, particularly if you live in a climate that requires seasonal heating or cooling.
There are plenty of downsizing tips for empty nesters, and if you don’t plan on converting empty bedrooms into functional spaces, such as a home office, yoga studio, or cozy library, you consider downsizing.
#4 You’re Considering a Lifestyle Change
One of life’s many guarantees is change—and downsizing can help you welcome it with open arms. Homebuyers of every age can experience developments in their life circumstances that lend themselves to downsizing, such as:
- Starting a family, and thus looking for a home that’s closer to family and friends
- You’re downsizing for retirement and need a one-story home in a warm climate
- Increasing world travel and desiring a small home that can be rented out
- Changing careers and needing to move to a large city with higher mortgage rates
- Experiencing a medical condition, thus requiring close proximity to medical care
- Dropping a kid off at college, thus allowing you to seek a home outside of the school district
- Experiencing loneliness, and therefore seeking a community-centered housing option
#5 You Want to Lessen Your Environmental Impact
Larger homes can have a serious impact on the planet. On average, American homes use 914 kWh of energy a month,8 and fossil fuels generate about 61% of electricity in the United States.9
That said, homeownership doesn’t only affect our carbon emissions—it also impacts native plants and wildlife. Large properties often decrease biodiversity, mainly because lawns replace native vegetation and homes are often built atop animal habitats.9
By moving into a smaller space, you can reduce your environmental footprint as well as your water, electric, and gas expenses. In fact, those that embark on the ultimate downsize—tiny homes—decrease their environmental footprint by nearly 45%.9
That said, you don’t have to buy a tiny home to live more sustainably. Transitioning into a smaller, albeit not tiny, home can have a similar impact on your environmental footprint, as smaller spaces require less energizing and, therefore, have lower carbon emissions and environmental impact.
#6 You’re Looking to Convert Your Home Equity
There are many reasons why one might want to convert their home equity: Those approaching retirement age may use their home equity to pay off bills, while others may use the funds to invest in a child’s college fund.
That said, when you sell your home, you can convert its equity into cash, particularly if you use a residential sale-leaseback program. If the reason for your downsize is financially-driven, a residential sale-leaseback solution allows homeowners to convert their home equity into cash to pay for their next home.
Streamline Downsizing With a Sale-Leaseback
If you’re asking yourself, should I downsize my home? It’s important to remember that there are pros and cons of downsizing. Consider your financial situation, lifestyle needs, and future plans before listing your home on the market. That said, if you’ve decided to sell your home, but aren’t yet ready to downsize your space, consider a residential sale-leaseback solution.
Residential sale-leaseback solutions allow homeowners to convert their home equity into cash and stay in their homes as renters until they’ve found the downsized home of their dreams.
Most homeowners downsize their homes to decrease housing costs, prepare for retirement, or make lifestyle adjustments. When considering when to downsize your home, pay attention to six telltale signs that it may be time to begin your search for a smaller, more economical home:
- Your monthly housing expenses are on the rise
- It’s becoming increasingly difficult to maintain your property
- You’re paying to power, heat, and cool unused or empty rooms
- You’re considering a lifestyle change, such as starting a family or retiring
- You’re looking to decrease your environmental impact
- You need to convert your home equity
- The Ascent. Is 2022 a Good Year to Downsize? https://www.fool.com/the-ascent/mortgages/articles/is-2022-a-good-year-to-downsize/
- Press Connects. Ready to downsize? These are the biggest things to keep in mind. https://www.pressconnects.com/story/news/2018/08/22/downsizing-common-strategy-older-homeowners/673084002/
- U.S. News. The Do’s and Don’ts of Downsizing Your Home. https://realestate.usnews.com/real-estate/articles/dos-and-donts-of-downsizing-your-home
- National Institute on Aging. Maintaining mobility and preventing disability are key to living independently as we age. https://www.nia.nih.gov/news/maintaining-mobility-and-preventing-disability-are-key-living-independently-we-age
- Housing Wire. Why are some homeowners downsizing? Depends on who you ask. https://www.housingwire.com/articles/why-are-some-homeowners-downsizing-depends-on-who-you-ask/
- The New York Times. Downsizing in Retirement: Expenses They Didn’t Expect. https://www.nytimes.com/2022/09/09/business/retirement/retirement-downsizing-real-estate.html
- Franklin D. Roosevelt Presidential Library and Museum. 75th Anniversary of the Wagner-Steagall Housing Act of 1937. https://www.fdrlibrary.org/housing
- Green America. The Upsides of Downsizing. https://www.greenamerica.org/consume-less-live-more/upsides-downsizing
- U.S. Energy Information Administration. FAQ. https://www.eia.gov/tools/faqs/faq.php?id=427&t=3