In several of my previous blog posts, I’ve talked about how we’re in the midst of a seller’s market with high buyer demand and not enough homes on the market to satisfy that demand. If you’re looking to downsize and move into a smaller home, it’s a great time to do so.
Downsizing one’s home has become a more popular retirement option, but it’s not just retirees and empty-nesters who are choosing smaller, more manageable homes. The growing interest in minimalistic lifestyles has caused many to reevaluate whether or not their possessions are overwhelming their lives. Others might want to decrease their eco-footprint, or simply want to spend less time maintaining and cleaning their homes.
Is downsizing is right for you?
Try to envision the lifestyle you’d like to have after you downsize. You might want to simplify your life in order to be able to focus more on their family and loved ones. A low-maintenance home is better suited for those who want to travel for extended periods of time. Some people might want to have a smaller home in a more intimate neighborhood that prioritizes socializing and community activities. If any of these options sounds ideal, consider downsizing.
You’ve got a concrete plan for your future. The proceeds from selling your current home can be substantial, and can go towards new, smaller homes in both your current city and in a vacation spot or your chosen retirement location. You will be able to lock in a home price that you can afford at today’s values, rather than waiting until the future to buy. Since interest rates and home prices are predicted to rise, downsizing is a smart move for those with the ability to plan ahead.
You have enough equity in your current home to make a profit from the sale, especially if you’ve had the property long enough to create positive equity. Of course, your current equity will be the bulk of the down payment on your next, smaller home if you’re not paying cash.
(By the way, do you know how much equity you have in your home? In the last year alone, Americans have experienced $1.2 trillion in equity growth, and now a huge majority of homes in the have positive equity. 80% of homeowners are not aware of how much their home has increased in value, so in fact, many people are not sure about their equity status. Although equity can be a difficult thing to track, an experienced real estate agent can help you figure out where you stand.)
What are the benefits of downsizing?
A study by Edelman Berland has revealed that nearly 1 in 3 homeowners looking to sell are doing so as part of a downsizing plan. This number has risen recently because the financial benefits of downsizing are easy to see.
A smaller home than your current home will probably carry a smaller mortgage, especially if you’re moving from a hot real estate market to a less expensive area. If you stay in that smaller home for 20 to 30 years, and pay hundreds of dollars less for your mortgage payment, you can save a large amount of money for retirement. The money saved on your mortgage can also go towards paying off other debt, such as student loans.
If your current home has appreciated greatly and you live in a hotter real estate market, market conditions will allow you to sell at your asking price or even above. Then you could use the money from selling your current home in order to pay cash outright for a smaller home. Can you imagine what it would be like to be completely free of a mortgage? If you’re unable to pay for the house in cash, you would aim to put down at 10 to 20% down payment on your new home, secure a fixed-rate mortgage, and pay it off early.
It’s a seller’s market. Won’t it be tricky to buy a smaller home?
In hot real estate markets like the West Coast or Northeast, where prices are rising rapidly, those looking to downsize might have difficulty finding a smaller home for the right price. However, those who want to relocate to the Southeast from these fast-paced markets would find themselves in an ideal bargaining position. If you’re able to, it’s smart to buy that smaller home before putting your current home on the market in order to have the most choice on a timeline that’s right for you.
If you are thinking about downsizing your home and want to evaluate the options you currently have, let’s meet up to talk through the process.
How many days does it take to sell a home in your neighborhood?
Market Report tells it all.