Dan here….Downsizing the home when retiring? How is that done? Anecdotal evidence in the Boston area reveals to me several reasons why downsizing is only a small percentage of the housing market: Aside from being able to handle maintenance to a later age than in the past, and wishing to maintain personal community that a move would disrupt, downsizing is not necessarily as affordable as a cursory look might suggest. Here is one look at data:
Via Calculated Risk:
Some interesting analysis from economist Josh Lehner, at the Oregon Office of Economic Analysis on whether people actually downsize in retirement. This is important since so many baby boomers are reaching retirement age. Will they downsize or will they age in place?
A few excerpts: Do People Really Downsize?
The question, or the assumption that older households downsize as they age is one that I’ve really struggled with trying to answer. Obviously it makes theoretical sense. As one’s children grow up, you no longer need as much space, and the love/hate relationship with the yard may become more physically taxing. I hear comments along these lines quite frequently. And many urbanists rightfully point out that one of the benefits of the missing middle housing — duplexes, quads, townhomes, etc — is it better allows aging in place. That is it would provide additional housing options within existing neighborhoods so if a household does sell/downsize, they do not have to leave their longtime friends and social networks. They can remain in the same area. An added benefit in this scenario would then be a larger, single family home coming back onto the market for another family to move into. We could adjust, or tailor our housing situation with our actual housing needs. Again, all of that makes sense. But do we actually see households downsize overall, let alone stay in the neighborhood? Turning to the data shows that it it kinda, sorta does happen on a small scale. …
I never understood the downsizing argument. What is the pay off? Why would someone in their 50s or 60s bother?
I understand moving to a cheaper location and cashing out the appreciated value of one’s home, but this may or may not involve moving into a smaller space. I understand moving to a more interesting place with more urban or outdoor activity options, but this may or may not involve moving into a smaller space. Moving is an immense amount of work, physical and emotional. Selling the old place and buying a new one is stressful and exposes one to new risks and potentially higher costs. In states with Proposition 13 type laws, it means any money saved by moving to a smaller place will turn into increased real estate taxes.
If you have spent twenty years or so getting your house finally adapted to your liking, and now your children have moved out giving you that den / office / studio you have always wanted, what exactly do you gain by moving to a smaller space? Let’s suppose you have a 2000 sf house with two children’s bedrooms at 500 sf. What are the odds that moving to a 1600 sf house is going to save you 25% even ignoring moving costs and tax effects?
The argument about home maintenance strikes me as bogus as well. Home maintenance is not a linear function of floor space and people do not have a precise maintenance threshhold. People in their 50s and 60s may be past their physical peak, but most of them can function fairly well as homeowners. Despite our nation’s falling life expectancy, most Americans are not becoming decrepit that much more quickly. Hiring a housekeeper or someone to mow the lawn is a lot cheaper and easier than moving, and most people can figure this out.
When people get into their 70s, things do change, but slowly. Most people I know in their 80s have made changes and many have downsized. If you were born in 1946, you would become 72 in 2018. In other words, we are just approaching the era when baby boomers might consider downsizing as they find it harder to maintain their homes. Anyone who is sitting around with bated breath waiting for a wave of baby boomers to finally decide that their home is too much hassle and that a much smaller place would work better aren’t going to be getting much air in their lungs.
My grandfather downsized after my grandmother died, but I think that had more to do with the state of the housing market at the time and a personal desire to leave a home that was inextricably intertwined with 50 years of married life.
I also think the trend of older people moving off to Florida peaked a while ago. When we were searching for a home some years ago, we saw a lot of homes in fairly bad shape where the aged owners had died and family was trying to sell the property off.
On the upside, it means that our neighborhood is experiencing a massive influx of younger families (which means friends and playmates for our child, and demand in the neighborhood for improvements to parks and facilities, the city built all new schools within the last fifteen years, but our neighborhood has been the oldest and most conservative end of town for years, as measured by long lines of voters in off-cycle elections and higher than expected support for the Republican mayor and treasurer, who are tighten your belt types, when the younger people in town would certainly prefer to resurface some roads and replace lead supply lines faster than currently scheduled).
Downsizing is a much talked about topic but really how do you downsize from a 4,000 sq ft house to a less than 2,000 sq ft house? People cannot throw away much so IME the garage in the 2,000 sq ft or less house is filled with stuff that the retiring couple cannot throw away (if your kids don’t want it, St. Vinnies will take it). I am retired and have moved 3 times in 4 years because we are following my daughter and her family, and have ended up renting in golfing or beach communities where there seems to be a lot of retirees. All the garages are filled (2 and 3 car) with stuff they could not throw away and the cars sit outside. It is funny. I moved from Boston to the mountains of N.C,., then to the coast of Oregon and finally to a college town in CA. Moving ( 12 times in my lifetime) forces you to make decisions about what you really want to own. I have to laugh because I have seen people move and move again and still have unopened boxes from the first move in the garage. Baby Boomers are somewhat stupid about where they move to retire and never consider being close to quality health care (University based hospital like Duke, etc). They mostly head for inexpensive areas the mountains, the coast, or golfing areas, i.e., Myrtle Beach; which are hours away from good health care (a hospital with quality invasive cardiologists and cardiac surgeons). Hey JMHO.
It’s too hard; there’s too much accumulated junk. Best to just die there and stick your kids with the problem.