Downsizing Your Home? Where To Now?


A Look At Your Many Choices When Downsizing Your Home.

A generation ago, aging people often told one of two stories when they retired or when their health began to slip: they either moved in with the kids or moved into a nursing facility. One of the most remarkable cultural shifts we’ve seen in the last several decades is the increasing number of seniors who are living independently and the vast array of places they’re choosing to do so. If you’re considering the decision to downsize your home, we predict you’re going to be delighted with the number of choices you have. How will your next chapter read? As with any great book,  your character will determine a lot. But the setting of your story is also vital. So let’s take a look at some of the common—and less conventional—paths seniors are taking these days when choosing new living arrangements.

Changing Needs And Changing Locations

As we age, we ask different things of the places where we live. Large cities, for example, are job meccas. Many people gravitate toward them in their younger years because that’s where the economic opportunities are. But once your career isn’t so influential a factor in your decision-making, you might choose to move to a quieter part of the world. Or perhaps years ago, you gravitated to the suburbs for safety’s sake or a better school system for your kids. Now that they’re grown, you’d love to be closer to downtown restaurants, museums, and the ballpark. In either case, if you’re looking for a change of scenery, you may also be looking at a different type of housing.

Incidentally, if you live in a city where space is at a premium, your version of downsizing your home could look like upsizing to someone else. You’d be surprised by how many seniors decide to take on second careers as ranchers! Remember, we all get to decide for ourselves what constitutes the right retirement move. Don’t be driven by anyone else’s definition.

How Low Can You Go When You Downsize Your Home?

In the late 1990s, the “tiny house” movement emerged, offering simplicity, environmental friendliness, and cost savings in one small package. The trend first gained traction in Europe but has since gone global. Houses are usually defined as having less than 400 square feet in living space. The Tiny House Society offers a fascinating group of statistics on the movement and tiny home owners. As it turns out, two in five tiny home owners are over the age of 50. While there aren’t very many tiny homes in the US, they appear to be selling like hotcakes. 2017 saw a 67% increase in the number of tiny homes sold. As more cities and communities become tiny-home-friendly and tiny home designers continue to offer a broader range of choices, market analysts predict higher demand for these little gems.

Adjusting to tiny home living, if you’ll pardon the pun, is no small feat. But here are just a few facts that may explain their growing popularity:

  • The average ready-built tiny home costs around $46,000. If you’re an accomplished DIY-er, you can trim the price down to about $20,000. By contrast, the average price of an existing traditional home in the US—including single-family homes, condos, co-ops, and townhouses— and the land it’s built on is $284,000. Of course, you’ll need much less land for a tiny home
  • Given the relative affordability of a tiny home, 68% of tiny home owners don’t have a mortgage. Wouldn’t it be nice to say goodbye to yours?
  • 60% of tiny home owners carry zero credit card debt. And 89% have less credit card debt than the average American.
  • Tiny homeowners are saving money, too. 55% of them have more money in the bank than the average homeowner.
  • Tiny homes are…well, tiny. Chances are, a tiny home would fit in one of your kids’ suburban backyards. Being closer to their family is one of the common reasons cited by people of all ages who pull up stakes. But among the over-50 set, it’s even more often a prime motivator.
  • Because many of them are built on wheels, tiny homes offer more freedom and flexibility. You can move yours to Arizona in the winter and Vermont in the summer if you’d like. Or from one of your kids’ backyards to another’s.
  • Tiny home design is an evolving field, and designers are striving for even higher standards of environmental sustainability. You can buy a tiny home made from reclaimed wood or a recycled shipping container. And tiny homes are becoming more accessible than ever before. Today, you can even order one from Amazon—free shipping included.

Condos And Co-Ops: What’s The Difference?

They may look the same: a single unit in a multi-unit building or group of buildings. But there are some crucial differences between condos and co-ops that many people—even the ones who buy them—aren’t aware of. When you buy a condo, you’re purchasing the interior of the unit you live in. Common facilities belong to the condominium complex owner.  When you buy a co-op, you’re buying shares in a corporation that owns the building you live in. That corporation owns every square inch of the building. The larger and more expensive your apartment, the more shares in the corporation you will own. But you don’t technically own your physical apartment. You’re buying a lease that allows you to live there permanently, or until you sell it.

Owners of both condos and co-ops typically vote on many matters affecting themselves and other residents, from the style of chairs that line the lobby to the color common hallways are painted. But co-op owners vote on one fundamental issue that condo owners don’t: they vote on whether to approve the sale of an apartment to a particular buyer. To a certain extent, co-op building residents get to choose their neighbors. This can sometimes make both buying and selling a co-op more challenging. Co-op owners, who tend to be long-time residents and may be more personally invested in their property, can be a picky bunch.

You—or someone you wish to sell your co-op to down the road—may have to go through a personal interview with a co-op board before you’re allowed to purchase shares in the building. The co-op board might also want to examine some financial documents you’d expect only to have to present to a mortgage lender. Some buyers might find that unsettling, while others might find it reassuring. It’s important to note that fair housing and anti-discrimination laws apply to co-ops, condos, and private homes and to both purchasing and renting a home.

There’s one significant upside to co-ops versus condos and that’s the cost. Co-op corporations are nearly always not-for-profit companies. Co-ops historically cost less per square foot than condos. Some estimates put the cost difference at 50% or more per square foot. That’s significant savings. The way you pay your utility bills is also different when you live in a co-op. The co-residents share the Gas, electricity, and water costs for the entire building. That’s why monthly fees are generally higher when you live in a co-op. Some of us are looking for greater simplicity as we age. Paying one bill rather than four each month does make managing your finances a bit easier.

Some real estate experts advise that sometimes it’s more challenging to get a mortgage on a co-op than on a condo. The best mortgage lender for co-op buyers may be a mortgage broker specializing in co-ops or a marketplace-style lender that works with a large group of lenders to find financing for its customers.

You Might Just Love A Landlord

Owning a home—even a tiny one—lays a fair number of responsibilities on your shoulders. Remember the days when you didn’t have to mow the lawn, hire a chimney sweep, or fix your leaky faucet? Many of us are even less enthusiastic about those chores than we were before, now that we’re feeling the years more. Between 2006 and 2016, the percentage of people in their 60s who rented their residences jumped over 80%. In 2017, seniors accounted for 22% of the rental market and analysts are predicting that number will increase significantly in the coming decade.

Apart from escaping the burden of home maintenance, many seniors choose to rent for financial flexibility. With home values rising and mortgage rates at record lows, some want to take advantage of a hot real estate market while they can and sell their homes. But they haven’t necessarily decided where they want to live next. Renting buys you time when you’re not ready to commit.

You might discover that the equity you have in your home could be put to more lucrative use by investing it elsewhere. Or you could add up your real estate taxes, homeowners’ insurance premiums, utility bills, and maintenance costs and find out you could be living less expensively as a renter. Finally, many of us once imagined leaving our homes to our kids, only to find out they don’t want the family home. They want to make their own decisions. And who can blame them? We want to make ours, too.

Downsizing Your Home Is A Balancing Act

Even though many of us look forward to and plan for retirement for years and years, the decision on whether—or how—to downsize your home is one we have to make at a particular moment in time. Our health, family needs, finances, and markets are fluid. Selecting your ideal solution to downsizing your home is best done in consultation with a financial advisor and often, your family,  as well. That’s a great way to ensure you have the dollars to fund your dreams.

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