According to two recent surveys that took industry watchers by surprise, many family homeowners are putting frugality aside and upsizing to new houses that average as large as 2,480 square feet (an increase of as much as 13 percent from the year before), and sometimes exceed 3,500 square feet in size.
Meanwhile, millions of baby boomer homeowners are rushing to downsize—with some 40 percent of Americans between the ages of 50 and 64 saying they’re planning to make a move within the next five years.
It’s a tale of two very different segments of the population making dramatic shifts in their living accommodations to find the housing solutions that best suit their needs: one upsizing while the other downsizes.
With so many baby boomers now nearing retirement age (8,000 Americans turn 65 every day), it should come as no surprise that the number of prospective “downsizers” exceed the number of “upsizers” by three to one. With their children gone, these aging homeowners are interested in reducing the amount of house they need to care for, and are eager to bulk up their retirement savings with any home-sale profits.
As for why many families are choosing to upsize so substantially after years of downsizing or staying put, experts point to the extremely low interest rates and discounted home prices available today, and theorize that many families now feel confident enough about the economy to move out of homes they outgrew years ago.
If you’re considering upsizing or downsizing, here are some facts to consider:
How such a move can impact your life
The most common benefits of downsizing:
- Lower mortgage payments
- Lower tax bills
- Lower utility bills
- Less maintenance (and lower maintenance expenses)
- More time/money for travel, hobbies, etc.
- More money to put toward retirement, debts, etc. (the profits from selling your current home)
The most common benefits of upsizing
- More living space
- More storage space
- More yard/garden space
- More room for entertaining/hosting friends and family
- Upsizing will likely increase your living expenses, so it’s important to factor into any financial forecasts
- Downsizing will require that you make some hard choices about what belongings will need to be stored or sold
Other impacts to consider:
- The loss of good neighbors
- Lifestyle changes (walking, neighborhood shopping, etc.)
- The effect on your work commute
- Public transit options
Buy first, or sell first?
Homeowners considering this transition almost always have the same initial question: “Should I buy the new home now, or wait and sell my current place first?” The answer is dependent on your personal circumstances. However, experts generally recommend selling first.
Selling your current home before buying a new one could mean you have to move to temporary quarters for some period of time—or rush to buy a new home. That could prove stressful and upsetting. However, if you instead buy first, you could be stuck with two mortgages, plus double property tax and insurance payments, which could quickly add up to lasting financial troubles.
If you need to sell in order to qualify for a loan, there’s no choice: You’ll have to sell first.
You could make the purchase of the new house contingent on selling your current home. However, this approach can put you in a weak bargaining position with the seller (if you can even find a seller willing to seriously consider a contingency offer). Plus, you may be forced to accept a low-ball offer for your current house in order to sell it in time to meet the contingency agreement timing.
The truth is, most home sales tend to take longer than the owners imagine, so it’s almost always best to finalize the sale, and do whatever is necessary to reap the biggest profit, before embarking on the purchase of your new home.
When to make the transition
Ideally, when you’re selling your home, you want to wait until the demand from potential buyers is high (to maximize your selling price). But in this case, because you’re also buying, you’ll also want to take advantage of any discounted interest rates and reduced home prices (both of which will fade away as the demand for homes grows).
How will you know when the timing is right to both sell and buy? Ask an industry expert: your real estate agent. As someone who has their finger on the pulse of the housing market every day, they can help you evaluate the current market and try to predict what changes could be coming in the near future.
Even if you’ve been through it before, the act of upsizing or downsizing can be complex. Feel free to reach out for tips, as well as answers to any questions you might have.