Downsizing is becoming an increasingly attractive proposition for those entering late-middle age and even younger owners concerned about the ongoing costs of maintaining a large home.
The National Association of Realtors (NAR) says one-in-four transactions now involve a seller seeking to downsizer. And data from Freddie Mac suggests the supply of new smaller homes – those measuring 1400sq ft or less – is now at a 50-year low.
The NAR states older Americans are now competing with first-time buyers because of a lack of new smaller homes being built.
A large proportion of Americans approaching retirement and whose children have flown the nest have little choice but to downsize, according to one think-tank.
Beyond believing their home has become too large to manage, more than 50% still have a mortgage, says the Urban Institute, based in Washington. To become debt-free and have cash for their retirement, they’ve got to sell. Back in 2007, that was true for only one-third of late-middle-aged Americans.
Did you know that there are many advantages to downsizing?
Boost to cash flow
With the property market performing so strongly recently, it’s a great opportunity to cash-out on the family home. Your property is likely to have grown in value by up to 20% in the past 12 months alone.
Mortgage costs
If you are one of those who still have a mortgage on your home, this may be an optimal time to downsize. With inflation at a 40-year high and the Federal Reserve pushing up the cash rate, many mortgage interest rates are moving beyond 5% to 6% now.
Choose carefully
Work with your financial adviser to ensure you have crunched the numbers properly. If you move into a condo or apartment, you’ll find management fees will hit your cash flow. So, be across all the numbers before making a final decision.
Shrinking bills
With electricity and gas prices going through the roof right now, who wouldn’t welcome lower bills? It’s much cheaper to run a two-bedroom apartment than a big house. You’ll achieve significant savings if you downsize wisely.
Feel free
If all the “stuff” you’ve accumulated over a lifetime weighs heavily on you, then this is a great chance to have a clean out. You’ll have to decide which possessions have emotional attachments because downsizing will force you to throw, sell and give away many belongings.
Time bandits
Big homes steal your free time. They require significant effort in maintenance and cleaning. I’m sure you know the feeling that the list of jobs never ends. By downsizing, you’ll get a sizable chunk of your life back.
Live your life
With more time, you’ll be able to start new hobbies or reignite old pastimes that you gave away when you were raising a family. Downsizing can and should change your life for the better.