One of the classic financial strategies for retirement is downsizing: cashing out of a bigger home, moving to a smaller one, and banking the difference.
But, as reported here, this may no longer be the right move in today’s troubled markets.
For one thing, the number of “smaller” homes for sale — i.e., homes measuring 750-1,750 square feet — has dropped by more than 50 percent since 2016. This pushes up the price of the limited inventory on the market. According to Realtor.com, the median list price in the USA for these homes was $199,250 in September of 2019, and today it’s $299,908.
Now add the effect of higher interest rates. The average 30-year fixed-rate mortgage is 7.49 percent. Among retirees, many have no mortgage on their home or are carrying mortgages at 2% or 3%. It makes little sense to swap these out for double the interest rate, or more.
The article quotes Hannah Jones, Senior Economic Research Analyst at Realtor.com: “The typical house payment is more than double the September 2019 amount.”
Home insurance and maintenance costs are also going up.
This doesn’t mean the downsizing strategy is gone, of course. According to the National Association of Realtors, just over a quarter of sellers traded down to a smaller home last year.
What’s changed is the strength of the model, and its “one-size-fits-all” inevitability. Now there are a wider range of concerns, and a wider range of options. It mean that in the world of SuperAging, there’s so much more to know, to keep track of, and to evaluate.
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