For many people, their house may be their biggest asset. But it also can be their biggest expense. That’s true whether they’re planning for retirement or even if they already are in retirement. So it’s no wonder that many homeowners begin to think about selling their home and moving into a smaller one as they approach their golden years.
Downsizing your home doesn’t have to mean downsizing your lifestyle. Homes have steadily expanded over the years with the average home now more than 2,600 square feet in the U.S. according to Census data – 60% larger than it was 40 years ago when families were bigger! So there is plenty of room to downsize without cramping your style.
But downsizing doesn’t necessarily mean moving to a smaller home. It can also mean moving to a less expensive residence that’s the same size. Something as simple as moving from a top, reputable school district to a district that is not highly rated may lower the cost of a house. And if you do not have school age children, the quality of the school district may not be that important to you.
If you’ve been kicking around the idea of cashing in on your home’s equity and moving into a smaller property, there are a number of reasons why it may be the best move you can make right now:
The housing market in our area has rebounded quite nicely from the recession with the value of many homes climbing in recent years. Cashing in on some of that equity appreciation may help provide retirement income and extend the life of your nest egg. For more information on the propriety of such a move, please first consult with your financial advisor.
A smaller home may mean a smaller mortgage payment each month if you are still paying off an existing loan. Or it might mean paying off your mortgage entirely and being debt free on your new home. Additionally, downsizing may lower your property taxes, energy costs, property insurance and ongoing maintenance and repair expenses depending upon the choices you make.
According to the Center for Retirement Research at Boston College (CRR), housing costs (including utilities, taxes and upkeep), represent one of the biggest expenses for a retired couple – 30 percent of expenses for a couple aged 65-74. That’s money that can be spent on other things in retirement.
For example, CRR estimates that a couple downsizing from a $375,000 home to a $250,000 home may be able to cut their annual expenses and increase their annual income from savings by a combined $7,260. CRR provides a calculator that may enable you to determine your own savings here. As always, it’s a good idea to consult with your financial advisor before making any decisions.
Some homeowners are reluctant to trade a house for a condominium or town house because of concerns regarding the financial impact of homeowners’ association fees. While such fees can change one’s monthly budget, keep in mind that you may be paying similar expenses as a homeowner in the form of maintenance and upkeep costs.
While a smaller home may mean less space, it could also mean less time and aggravation spent on keeping up a big house. Without all the work that goes into keeping up a bigger home, you may actually find a lot more time to enjoy traveling, hanging out with friends, picking up new hobbies and, generally, having more fun!
Moving from a suburban home to an apartment or condo building in a downtown area with amenities on site may open up a whole new world for retirees. Those who have made the switch often find that they now can enjoy more trips to the theater, nightclubs, restaurants, shopping, as well as taking advantage of fitness centers and other on-sight activities.
According to the Wall Street Journal, it can pay to downsize sooner rather than later for those approaching retirement or already retired. The financial benefits can add up over time. Additionally, as we get older, moving gets harder thus it may make a lot of sense to move now rather than waiting.
If I can help answer any of your questions about downsizing, please give me a call or e-mail me today. I’d be happy to discuss the pros and cons of making a move and help you decide if downsizing is right for you.
Did you know that there are less than 550 single family homes on the market in Santa Clara County at the moment? That’s less than 1/5 the normalized market inventory of homes for sale in the County and is a historical low. If you are considering selling, there is no time to waste! Give me a call today to discuss how to get top dollar for your home. Don’t let this amazing market pass you by!
Check out this months Reality Check which takes a look at economists predictions for the housing market in 2012. Some notable highlights from this report:
Some top economists predict the worst of the downturn may be over and expect to see a gradual improvement in home sales and prices in 2012
Housing affordability is as good as its been since 1970 with reduced home prices and record low interest rates
Favorable market conditions and an improving economy are expected to lead to a 4-5% increase in home sales in 2012 according to National Association of Realtors (NAR) economists
Consumers should expect to see home prices gradually rise this year with inventory declining in many areas
Given affordable home prices and historically low interest rates, buyers should consider jumping into the market right away before rates go up and lack of inventory causes prices to rise, which some speculate could happen in the second half of the year.
It’s official. According to Freddie Mac, 30-year fixed mortgage rates have hit a low of 3.91%. What does this mean to you, you ask? Well for one thing, it means that you can refinance that old loan you took out on your house back in 1994 when rates spiked. It also means that those who have been on the fence about wanting to purchase a new home in 2011 have even more reasons to do so.
In my last blog post, I mentioned how the middle market was seeing some sluggishness as current home owners were wary of trading up for a larger home in the Bay Area market. Given where rates are today, those looking to ‘trade up’ should find the purchase a little less risky and perhaps in 2012 we will see some movement in the mid-range market which encompasses the majority of the Bay Area. Additionally, the first-time buyer market should see some good traction with new buyers able to take advantage of great rates and home values still below peak along with FHA loan maximums at $729,000.
According to an article today on CNNMoney.com “Mortgage Rates Hit another Record Low,” there could be even more reason to buy in 2012 as lenders may be loosening up on borrowing requirements a little bit during the year.
With more buyers in the market, those thinking about selling their homes should consider the beginning of 2012 to do so before a possible rate increase comes our way.
As always, if you have any questions about buying or selling your home, feel free to get in touch with me today.
Check out the link to this month’s Reality Check from Coldwell Banker which takes a look back on the housing market in the Bay Area in 2011.
Of particular interest is CAR’s forecast of new home sales in 2012 – which stands at a sluggish 1%. However, this forecast encompasses the entire state of California and given the dynamic Silicon Valley market, which is adding high quality jobs, one can only hope that the local market will outperform CAR’s prediction.
The market is also seeing strength in the luxury high-end home segment specifically in Silicon Valley, San Francisco and the Peninsula with many homes for sale receiving multiple offers. There was some noticeable distinction in the mid market, where there was very few homeowners ‘trading up’ perhaps due to economic uncertainty.
Some hopeful signs for 2012..
There seem to be fewer distressed sales
As buyers become more active in the market place and inventories compress, pricing has begun to firm up
Some banks have implemented procedural efficiencies for processing short sales, allowing for faster approvals
The news media has finally started to question if we have reached a bottom, which will hopefully boost consumer confidence
Here’s to hoping 2012 marks a true turnaround in real estate market in California and specifically and Bay Area!