Downsizing your home may have pros and cons, but it mostly all ties to the these most important factors, your lifestyle and finances. Perspective in quality of life and home varies from person to person, so this is not to say one way is right and another one is wrong. It is for you to know what quality of life is to you. How you want to live and what is important to you, are a few questions that will help you with the right decision for you!!! Homes are often 2 things to people, where they live their life and is also often their largest asset they own. So it is good to view any home with those 2 considerations at the top of the list when evaluating your choices.
I think the last economic and housing crisis woke up a lot of people and has lead many people to a new way of thinking, I hope so anyway. Many people owned homes that they couldn’t afford and/or didn’t need which really left them working most of their life to just pay for their home with very little time and money for quality of living.
Empty Nesters are the dominate group considering downsizing their home… Their children have grownup now, not really needing all the space they have now. Not to mention, wanting to take more time to enjoy life instead of slave over the things in life… I definitely say I am one of those!!!
A Few Things to the Benefits of Changing to Consider If Downsizing Your is Right For You…
1.) Less house to clean, snowball effect… Leads to more time for fun. And if you have a maid, see number 2. Well I think it is a benefit anyway, how many wonderful memories do you have of cleaning the houses? How many when having fun? I know, I know the answer to that… LOL
2.) The Savings of Less overhead in overall maintenance cost. Downing changes many things. From utility bills to repairs, most probably less property taxes. Smaller house payment too, or even no house payment would be even better! Snowball effect, more money to do the things you would enjoy. I know what is best for me, I always prefer quality over quantity and it works for me. What best for you is the point of this. Personally, I have a motto I really like to adhere to for me. If I don’t love, find it beautiful, or useful… is really not important to me. Enjoy Living, now that is important to me, Everything else is just everything else. It most certainly and almost always does not mean things. 🙂
Maybe the time is now or maybe it is in a few years
Only you can say what is right for you. The housing market history reflects there are always cycles and what I can say is right now the market is still moving well, so values are good. Depending on when you read this, surprisingly, they haven’t dropped much. I think the most impactful thing currently, everyone has low interest rates, many not selling due to that fact. The ramifications of that is keeping inventory for amount of homes on the market, lower than usual. There will be a time it halts and values drop and not much moves, 2005 oh my did that ever happen, back in the 90’s. History shows us, it has continually happened to varying degrees, and it will happen again.
If you have enough equity and the higher interest stopping you, I’ve got a must read with mighty good way for you to address that issue. #1 Best Tip to Lower Your Mortgage Payment
When Downsizing Your Home, There are These Thoughts that are Worth Contemplating in Regards to What Will Happen to the Market and Where are we Headed?
1.) The housing market history reflects there are always repeated cycles. While the market has bounced back and is strong here right now… It is creeping up a bit slower now so that is worth paying attention to.
2.) Of course I am viewing and writing specifically about California but where ever you are, same concept. There may be limiting gains down the line because a lot of major companies are leaving California for much lower operating cost outside of California… They are leaving at a fairly rapid rate… Not to mention several major companies just in the last few weeks have announced serious financial issues… Just because things appear out of the woods does necessarily mean long term… Now that could just mean a shift in how people are employed and make their living here… remains to be seen how that evolves.
3.) Also important to note, much of younger generations are expressing that they do not want the bigger and expensive housing. Their behavior, desires, and commitments are very different than previous generations and their idea of the American dream has also changed… their is a lack of community as a whole and more of individual pursuit… that indeed could a game changer in Real Estate market that does come into play here too.
4.) Many of the people that had short sales and foreclosures are starting to reenter the market, but many are not so eager to to reenter the market and buy larger and make the same mistake… Between them and the younger generation it will be interesting to see how that affects the market, what changes it demands, and outcome for the values on the larger homes in the future. That combined with the soaring prices of homes, many people feel the prices are becoming out of reach for them.
5.) Interest rates… They have been record lows but will not always be the case. History shows when that changes… So does the market!!!
And then there is this to consider when downsizing… Time! 🙂
Home Expenses and Equity, Considerations When Downsizing Your Home
So what if your house payment is 3500 dollars a month? You are thinking about waiting another 5 years… The expense for living in that home will run up to a min amount of 3500 x 60 is $210,000. That means unless your home value increases by that much, you will be throwing money away. And that is only showing the amount of the mortgage, there is also the property tax and overall utilities and these days. Utilities have really gone to extremes. For many people it is not only their home but is also their largest asset and investment, so it matters!!!
When downsizing your home, considering both your expenses and investment, should be on the table when deciding. 5 years from now the real estate picture could look very different. Interest rates will also effect the housing market. I do not claiming to be an economic expert however, even the ones that are, only predict but economics play a powerful roll in everything that happens. Things are shifting, jobs are shifting, work place, products, development, people, desires are shifting. So I think it is smart to at least consider these in your analysis for reality.
One More Financial Decision Really Important Consideration
That pesky little thing called Capitol Gains. Not going to get into everything that a blog in itself but a couple of things to be very aware of. When downsizing your home, most often it is buying a less expensive home unless of course you are going for a beach house. 🙂 So equity has Capital gains. Capital gains some might be surprised is from what price you bought the home at and sold the for, minus expenses. So if you refinanced and took money out, you still pay Capital gains. Capital gains percentages vary depending on reported income. One very wise piece of advise I would like all homeowners to know, whether selling now or not… Save ALL receipts for every upgrade you do to your home, Everything! You do get to deduct upgrades from the total gains. Also, there is a current forgiveness of $250,000 for singles and $500,000 for married couples from that total as well. The IRS does has a way of allowing you to defer paying capital gains taxes if buying another home, but it is important to see if that is an avenue that you can qualify for.
California is Always Going to be a Desirable Place to Live for Many.
It really is a beautiful state, for the weather, beaches, and outdoor activities. Here in Orange County, San Diego, and Temecula area, we seem to always hit the top 10 list of best cities. However, many are choosing to move out of state because it is also the top 10 list of the most expensive cites to live. That last one is driving people out while the first one is driving people here. For the most part, it balances out a little for the ones that leave, more people come.
We have lost about a 1/2% of the population due to the cost of living and many more big corps move out to a tax friendlier, lower cost of business and living expense states. Strange enough, I do see some starting to come back, but some are also enjoying a lower cost of living. Can’t say I blame them. I support everyones decision, which gives them the best quality of life for them and their families.
If Moving Out of State, 3 Important Considerations
This is a consideration for many, especially because of the cost of living in California is high. Especially if this is a place you plan to retire there, these considerations are worth questioning for making the decision that is best for you. When downsizing your home, I’ve explored all the states, and here are the things I think is wise to keep in mind.
#1 Will you like living there?
Reality if it is possible, it’s often better for a 3 month trial. In our mind, we may think it’s great however, experience in living there, always gives you the real truth of pros and cons, over expectations. I’ve seen people that are real happy they made the choice, and others just want to move back. A 3 month trial period opens up things you might not have realized. Helps you decide if this is the quality of life you are looking for.
#2. Health Care, how is the area access and ratings to health care.
As we get older, that becomes a important factor. At least, I believe it does because, I want to live as long as I can feeling good in mind (that’s what I am referring to in #1) and physically. Both of those do add to quality of life. Are they ranked well in care, and what’s the distance to that care.
#3 The financial aspect comes in form of property taxes.
SS taxation varies in states which is usually manageable, but so do property taxes. For example, not to pick on Texas but a good example. Wow, their property taxes are so high. Here in California we are about 1%, Texas can be as high as 2.8% depending where. Also how much can it go up? CA there is a 2% raise cap a year. Texas the cap can be 10% per year, it is not only much higher percentage but the raise per year can be much higher. If you are on limited income, over time it might price you right out of living there. Mortgages can be paid off, your taxes you pay forever. In time, your taxes could be as high as mortgage payment. So seriously consideration to property taxes is wise.
If you choose to sell here, If I am your selling agent, I can guide you to agent just about any where. We have agent connections just about anywhere you move in the United States. We don’t abandoned ship once we recommend someone, you access to us both. That’s a big plus because the more help you have with different perspectives. often helps you avoid downfalls. They are life changing moments, we as OC Property Sisters are here with the entire process of helping you through them.
There are More Considerations When Downsizing Your Home
I thought I would just throw some light on a few things worth consideration when it comes to downsizing your home. Tiny homes are a pretty hot trend for the ones looking at extreme life changes… that is quite an interesting topic as well. Some great stories there, definitely not for everyone. Maybe another day I will write about those. Here is What I know I do, it is what is best my clients!!! One of those things means, exploring all the options and provide you information in the places that you have interest it, so you can make the best decision for YOU for whatever type of home you are searching for!!!
Thinking about Selling or Buying in San Diego or Temecula… We are just a phone call, text or email away with any questions you may have or in helping with the choices that are best for YOU!!! Wishing you all the best in moving forward down this wonderful crazy wild adventure of life.
Quote for the Day…
The way you look at things is the most powerful force in shaping your life.
~ John O’Donohue
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