By Meera Pal
Sep 14, 2023
In the not-too-distant past, common practice would find empty-nesters and retirees sensibly deciding that two people in a 2,500-square-foot house was maybe excessive. Soon enough, the house would be sold and traded for a condo someplace with no snow to shovel.
But nowadays, many homeowners are bucking the retirement trend of moving to a smaller home.
“Downsizing your home can be a significant decision that has both advantages and disadvantages,” says Tory Yates, a real estate agent with Century 21 Redwood Realty, in Frederick, MD. “While there are valid reasons to consider downsizing, there are also reasons why you might want to think twice before making this decision.”
If you’re weighing whether to shed square footage or stay put, check out these seven reasons to avoid downsizing.
1. Swapping a mortgage doesn’t make sense right now
With mortgage rates sitting at around 7% on 30-year fixed-rate loans, homeowners with a lower rate might want to stay where they are.
“Say you’re thinking about moving to a smaller house to save money, and your current house has a 2.95% interest rate for the next 15 years,” says Mathew Pezon, a real estate investor and CEO of Pezon Properties in Easton, PA. “When you add up the costs for a 7% interest rate in today’s market, you may end up with a 20 to 30% smaller house but with the same housing payment over the next 15 years.”
In that scenario, you would not reap the massive savings that usually comes with downsizing.
“You’d have the same payments and a smaller house,” says Pezon.
2. You can’t afford the cost of selling
Don’t have a mortgage? Downsizing can potentially reduce your living expenses in the long run; but in the short term, it could end up costing you more than it’s worth.
“The costs of selling a home—think real estate agent commissions and closing costs—can outweigh the immediate financial benefits,” says Mike Qiu, owner of Good as Sold Home Buyers in Kirkland, WA. “Additionally, market conditions may impact the potential for selling at a desirable price.”
And when you add in the capital gains tax implications, it might make more sense to remain in your current, larger home.
3. You prefer to age in place
If you already have a home that can be modified to help you ease into your golden years, then downsizing may not be the right choice for you.
“If you have mobility issues or other health concerns, you might not be able to live comfortably in a smaller home,” says Andrew Lokenauth, personal finance expert and founder of Fluent in Finance. “You might need a home with features that are specifically designed for aging in place, such as wider doorways and ramps.”
In a larger home, you’ll be likelier to make any necessary renovations, including adding an accessible bath and shower, and hard-surface flooring.
4. You aren’t comfortable in a smaller space
Just because it makes sense to downsize to a smaller space doesn’t mean it’s necessarily the right choice for you personally.
By downsizing, you would likely have to give up an office or a bathroom—and maybe even the extra storage space where you stash your holiday decorations.
And forget about sleepovers with the entire family.
“Going smaller might mean giving up those extra rooms you’ve come to love,” Pezon says. “You might end up feeling less comfortable and fulfilled—especially when you’ve put time and effort into making it special—so why downsize if you’re already content with where you are?”
5. You plan to use your extra space to make a little money
You might be living on a fixed income, post-retirement. So what if you could make a few bucks using your extra space?
“You could turn your extra rooms into passive income by renting them on Airbnb,” says Jake Hill, CEO of DebtHammer, a personal finance website. “Renting your extra space allows you to supplement your Social Security benefits and retirement savings, which can improve your quality of life and ensure the longevity of your retirement income.”
And if you aren’t comfortable renting a room in your home, there are other options. You could rent out a storage space or add an ADU in the backyard to make rental income.
6. You might need multigenerational living space
Maybe your aging mother can no longer age in place at her home, or your adult daughter and her family need a place to live for a little while.
“If family is moving in, the space that a larger home provides can be invaluable,” says Rod Khlief, an estate investor in Sarasota, FL. “This allows for better privacy and comfort for everyone involved, fostering a harmonious living arrangement.”
7. You love your house
Financial reasons aside, emotional attachment is a legitimate reason to skip downsizing.
“Many homeowners have deep sentimental connections to their homes, which can make it difficult to let go,” says Josh Steppling, a real estate agent in Stuart, FL. “The memories and history tied to their current space can be a source of comfort.”
Retiring can be an emotionally challenging time already; adding a move to that can make it even more stressful.
The bottom line? Choosing whether to downsize is an entirely personal decision that only you can make.
Meera Pal is a Northern California-based writer with a background in journalism and books. She covers tech, real estate, and everything in between.