If you’ve been looking at the pros and cons of downsizing your home, you already likely understand the challenging decision it can be. After all, there can be a lot of factors involved in your choice. The first is determining why you want to consider downsizing your home in the first place. Have you become recent empty-nesters? Are you perhaps getting closer to retirement? Are you tired of taking care of a large home or need to cut expenses? Others downsize because they are moving to an area where real estate is simply more expensive.
According to the U.S. Census Bureau, the average size of a home in America in 1973 was just over 1,500 square feet. That number reached an all-time height in 2015, topping an average of 2,600 square feet. This is at a time when families are getting smaller. Many of us are realizing we may just have too much house to pay for, maintain, and clean.
There are myths to both the positives and negatives of downsizing. Here is a look at nine of them.
1. You Will Feel Crowded After Downsizing
The reality is, you probably have plenty of space in your home you don’t use. Many homes have formal dining rooms they only use on holidays. Some have large, lavish kitchens they rarely use. The USDA says we eat meals prepared away from home over 43 percent of the time. Some homes keep a guest bedroom although it may be rarely used. Then you need to consider if you really need that large in-home office or media room.
2. Downsizing Will Eliminate Your Mortgage
In 1970, almost 40 percent of us owned our homes outright without a mortgage. Today that number has dropped to under 30 percent. Unless you have significant equity in your home, odds are you will still have a mortgage even after downsizing. The difference is that mortgage could be much smaller or for a much shorter period of time. When downsizing, homeowners should review their options for their new mortgage and compare. Some people who downsize, especially as they get older, may prefer to live in a managed community where maintenance is included. HOA fees are not a part of the mortgage costs, but they will impact your monthly living expenses.
3. Utilities and Property Taxes Will Be Reduced
Although reducing expenses in this area is possible, it can depend on where you are downsizing too. Electric rates and usage vary widely state to state. In 2013, the Department of Energy said electric use ranged from an average of 515 kWh in Hawaii to 1,273 kWh in Louisiana. You can see why electric use is so low in Hawaii when you realize they have the highest price per kWh in the country at $36.98 per. Washington State has the lowest average cost per kWh at $8.70. Property taxes vary similarly. While the average homeowner in the country pays $2,089 in property taxes, they range from a low of $482 in Hawaii to a high of $3,971 in New Jersey.
4. You Will Have to Give Up Prized Belongings
There is no question most people who downsize will have a moving, yard or garage sale to minimize their belongings. That doesn’t mean, however, that you have to give up anything you truly want to keep. Many families struggle with what they absolutely have to keep and what they can get rid of. Remember, if downsizing does indeed cause a space issue you can always rent a storage unit. If you are an empty nester with adult children who are using your home for storage, its time to have them take ownership.
5. Downsizing to a Community with an HOA will Save You Money
There is no question living in a managed community may make your life easier. It can eliminate yard work, shoveling snow, and some outside maintenance. HOA fees may include maintenance of a common pool area, park, or community room. HOA fees can vary greatly from community to community and can actually increase your overall living costs. If you are thinking about buying into a community with an HOA, be sure to fully understand what is and isn’t included in your fees. You can then make a better decision on if the convenience and amenities are worth the expense.
6. Downsizing Takes a Long Time to Plan
This myth is often used by people who can see the value of downsizing, but don’t want to undertake the project. Downsizing does take some planning and effort, but it can be done in the time it takes to conduct any other real estate transaction. This myth about downsizing is that it is an involved project. It really is just moving into a smaller home.
7. Only Seniors Close to Retirement Downsize
The Conference Board’s 2012 Consumer Confidence Survey says only 29 percent of those between 50 to 64 years old plan to move within the next five years. That number gets lower, 14 percent, when looking at Americans 65 and older. While many of those reaching retirement age consider downsizing, many are comfortable in larger homes that they have lived in for some time. Downsizing is actually more popular with couples who have adult children who have moved out. These couples realize they no longer use the bedrooms, big yard, and multiple car garages that were important a few years ago.
8. Downsizing is All About Saving Money
While many, in fact, make the move to downsize to reduce expenses, many also do it to reduce the time they spend cleaning and maintaining a property. Many others move to a community with more amenities or to a place with better weather. Some will downsize to move into the city and some will do the opposite. Certainly monthly expenses can play a factor, but for many it is more about lifestyle.
9. You Can’t Downsize With Children at Home
While many wait until their children move out, downsizing can be done even with children still at home. For some, downsizing can mean more money for family vacations or college. In this era of more is better, young families with children are the least likely to downsize, but in can be done for some practical reasons.
2 Point Highlight
Many of us are realizing we may just have too much house to pay for, maintain, and clean.
Downsizing does take some planning and effort, but it can be done in the time it takes to conduct any other real estate transaction.
