Downsizing your home is often associated with retirees or empty nesters, but given the current housing environment, it may be worth considering even if you’re not in that life stage. With the lack of housing inventory in the market, now is a great time to downsize your home. You could take advantage of the low-interest rates, which give homebuyers the flexibility to pay higher sales prices.
The Move to Downsize
Downsizing means less cost, maintenance, and hassle. With a cultural shift to minimalism, this is a priority for many families. Downsizing has become a consideration for many people in all stages of life, especially in the wake of the COVID-19 pandemic. Many individuals and families have shifted focus from excess to intimacy and expenditures that enhance the quality of life, both of which come more easily with living in a smaller space.
Why is Now the Time?
Low Interest and Mortgage Rates
Historically low-interest rates are one of the main interest points for the current housing market. Low rates can mean saving a substantial amount of money over your lifetime on interest alone, and you can save even more if you take this opportunity to downsize.
Low mortgage rates have encouraged buying, even with housing prices going up, creating a great selling environment. While rates are low now, it won’t last forever, so if you think you might want to sell in the near future, now is the time. Rates can change quickly and they are strongly predicted to rise by the end of 2022.
Supply and Demand
There are simply not enough homes on the market currently. Housing inventory hit a record low at the end of 2020, which is partially due to extremely high lumber prices, pushing the cost of new construction higher. The current supply and demand climate has created an ideal environment to sell your home at a great price. However, upsizing to a larger home could offset this. Making the choice to downsize can save you money and help you prioritize what matters.
Cost and Tax Benefits
A smaller house means lower expenses. Upkeep costs and utilities cost less, not to mention the lower price tag that comes with a smaller home. Tax benefits could save you even more money. If you meet certain legal requirements and sell your home for a profit, up to $250,000 of the profit can be excluded from federal taxation ($500,000 for jointly filing married couples). To claim this exclusion, you must have owned and lived in your home as a primary residence for at least two years.
Who Should consider Downsizing?
The traditional answer to who should consider downsizing is retirees and empty nesters. In these transitional stages of life, people tend to need less space and more functionality in their homes as well as more financial freedom. However, downsizing can make sense for many different types of people and families. Culturally, excess has been a strong trend. Homes in the U.S. are among the largest in the world, and between the 1970s and 2010s, the average square footage per resident nearly doubled. Downsizing is for anyone looking to reprioritize their lifestyle, reconsider their attachments, and save money.
Steps to Downsizing
If you think downsizing might be the right decision for you, take these steps to begin the process:
Crunch the Numbers
To ensure you are making the best financial decision, make sure to take time to consider all costs involved, including the cost of selling your home (which could involve repairs) and the cost of moving. If you plan to relocate to a different city or state, be sure to account for the additional costs this entails. It’s easy to overlook the upfront costs of moving when you’re looking at the big picture, but it’s important to understand all of the financial implications of your decision.
Declutter
We tend to collect items to fill our homes. On your journey to downsizing your home, clutter can be a major roadblock. Consider decluttering and getting rid of excess at the beginning of the process. Decluttering sooner rather than later can eliminate some of the stress of the moving process and make it more efficient. Not only can decluttering make you feel better but can also help your home sell faster. Potential buyers enjoy seeing a clutter-free home.
Contact a Realtor
A lot goes into selling your home. A trusted realty company can be your best asset during this process. Traditional selling options are to use a real estate agent, for sale by owner, or a flat fee broker. Innovative home sale options, like those offered by Simply Better Realty, give you a strategic partner in your home-selling process without the high commissions of a traditional agent. As you take the next step in your journey to downsize, finding the best realty partner is essential.
