Looking for a smaller home? Here's when experts say you should start your search.
Whether you’ve recently gone through major life changes or just find yourself wanting less space to maintain, it might be time to downsize. Becoming an empty nester, retiring, or aging in general can prompt these shifts in lifestyle and needs.
“Many people who downsize come to realize their home is too large and seek a smaller property, like moving from a single family house with a large yard into a small house or a condo complex, as people often don’t want the upkeep of a larger property in their older age,” says Dave Liniger, founder of RE/MAX.
Of course, downsizing doesn’t always mean buying a smaller home—or even a less expensive one. It could be you’re looking to simply downsize on maintenance responsibilities or fees.
“Whatever the reason, the reality is the larger your home is, the more work it is to clean it, cool it, repair it, maintain the yard, etc.,” says Scott Bridges, the senior managing director of consumer direct lending at Pennymac.
A smaller home can cut back on these responsibilities while also allowing the buyer to adapt their living environment to match their current life stage.
“By downsizing, individuals can create a living situation that is more manageable, cost-effective, and aligned with their current stage in life,” says Stephane Guerrier, a broker with the Julia Hoagland Team.
In the past, looking for a downsized home later in life might have meant relocating to a different part of the country, but nowadays you might be looking for a new home in your own neighborhood.
“Around 25-30 years ago, those looking to retire would relocate to the sunbelt, away from larger cities and colder weather,” says Liniger. “This has changed a bit, where most people now that retire and relocate will buy a second home within the same mileage of their past residence to be closer to family and have the ability to come visit.”
As you begin your search, you might be wondering what kind of housing market is ideal for purchasing and shopping for a downsized home. We spoke to real estate professionals who some advice on what to look for and how to compete in today’s housing market.
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Why You Might Choose to Downsize
Just as there is a time in most individuals’ lives when they purchase their first home, move-up to a larger home, or secure a dream home, there’s often a shift toward smaller homes further along the line.
“Downsizing comes about when kids grow up and move out, when someone loses a job, when there is a death in the family, or when someone retires,” says broker Julia Hoagland of Compass.
These major life changes often have a big impact on the kind of lifestyle you want to lead at home. If you’re no longer gathering the family around your two-story deck, or entertaining guests across multiple spare bedrooms, you might find you no longer want or need the additional space.
On top of that, maintaining a home becomes increasingly difficult with age, especially when money is tight.
“Some individuals may not want to deal with the upkeep of a larger home, such as dealing with high priced utility bills, property maintenance, etc.,” says Bridges. “There’s also people out there who might want to move to a more expensive location, with access to local amenities that they wouldn’t have at their current home.”
Overall, the shift toward a smaller home leads to less stress.
“Most people that are downsizing are seeking less hassle in their life, more safety, or more security,” Liniger says. “Oftentimes they have already achieved their own personal and life goals and no longer see the necessity to keep a home that no longer serves their needs.”
If you’re at this point in your life, you might prefer to refer to this shift as “rightsizing,” says Mary Barbrack, an agent with the Julia Hoagland Team. This term fittingly means that you’re looking for the home that’s perfect for your needs.
“They are not only looking for smaller, more manageable homes, but they often no longer want to deal with the upkeep of their larger homes, for example, landscaping, large tax bills, maintaining large appliances/mechanicals or replacing a roof, dealing with trash removal, etc,” she says.
Related: What Is a Starter Home?
What to Look for in a Downsized Home
Just as the reasons for downsizing will vary from one buyer to the next, so will the needs and wants people seek in a new home. But there are some features that most buyers are especially adamant about finding.
Most buyers have a desired number of bedrooms and bathrooms, a certain property size, and a level access to various amenities in mind. Buyers should also get clear on the type of home they’re looking for, whether it’s brand new or older. Most buyers at this stage will want a turnkey home, as tackling major renovations or upgrades is burdensome, especially later in life.
“Some downsizing buyers may like older homes that offer more charm and others might want to explore living in a condo or townhome, which can be more cost effective with no yard maintenance, while providing a sense of community,” says Bridges. “Homes that are located in less expensive neighborhoods can help homeowners allocate money to provide more financial freedom.”
Like all buyers, downsizers might have to make some compromises when weighing potential properties.
“Ultimately, it really boils down to what the home buyer can afford as well as their specific needs and preferences,” says Bridges.
Guerrier points out that if you are downsizing on the overall square footage of your home, you’ll likely have to downsize your belongings as well—or at least consider how much storage space is available in your new home. If there’s not enough space in the home itself, you might want to rent offsite storage for certain items you aren’t quite ready to part with.
But other features will need to accommodate your new lifestyle, she says.
“Consider how the downsized space will accommodate your preferred activities and lifestyle choices,” Guerrier says. “For instance, can you still host dinner parties in your new home or tend to your garden? With careful consideration and thoughtful planning, downsizing can lead to a more streamlined and fulfilling living environment that meets your changing needs and preferences.”
When Is the Best Time to Buy a Downsized Home?
High home prices and low inventories continue to plague the housing market, but real estate experts say you shouldn’t let those factors play a huge role in your decision of when begin your search.
“There, of course, is no national market, but instead there are very strict regional and local markets, so it’s best for individuals to analyze their own lives and financial situation among other factors to make the best decision for their current lifestyle,” says Liniger.
However in general, shopping when inventory is at its highest throughout the year is best. Oftentimes, that’s summer.
“The best market to downsize is an upmarket, as while you’re going to be buying high, you’re selling high as well,“ says Hoagland. ”While the percentage premium is theoretically the same, the absolute premium you get from the sale will more than pay for the premium on the purchase.”
Of course when inventory is high, you’ll be competing with more buyers.
“Keep in mind, this also leads to more competition as well,” says Bridges. “The reality is, however, you can shop year round for a new home, and every season has their advantages and disadvantages.”
Most downsizing buyers who have spent several years in their current home will have an advantage over move-up buyers, and especially first-time home buyers.
“Buyers who are downsizing will oftentimes have much more in available funds to utilize for down payment as they’ve just sold their larger home,” says Bridges. “This can make their offers more appealing in a competitive market.”
However, one complicating factor could be that many downsizing buyers are also selling their home at the same time that they’re buying. Having a sale contingency often makes buyers less attractive, says Hoagland.
How to Anticipate Challenges
Low inventory means major competition, and that can complicate your hunt.
“In today’s market, the less expensive a home is, the more buyers there are looking to purchase, meaning the competition is most likely greater,” says Liniger. “This isn’t just specific to downsizing buyers, but is often the reality of many move-up and first time buyers as well.”
At the same time, buyers might be overwhelmed about the idea of accepting a high loan rate when they’ve enjoyed a lower one all these years. Plus, buying a new home while trying to sell your current home can also add to the stress of finding the right house.
“There can be a few challenges that arise when a downsizing buyer is looking to sell their current property, while at the same time looking for a new place to call home,” says Bridges. “This can include timing the transactions properly, finding accommodations while transitioning into a new space, and understanding financials to really see the full picture.”
Of course, there are solutions—even if you’re stressed about timing the logistics of buying while selling.
“Many real estate groups offer buyout programs, where the realtor or agency will list your current property to guarantee you the expenses, removing the pressure to sell quickly,” says Liniger. “Those with savings and a good standing credit can qualify for bridge loans to help purchase a new property while placing the current home on the market.”
Working with the right real estate agent will help you navigate these challenges.
“Researching the area and careful planning while implementing these life changes can help greatly to find a suitable home that meets the downsizing buyer’s overall needs,” adds Bridges.
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