Should We Downsize? More Considerations
Last week I asked: Should We Downsize? Many of you shared things to think about, your own situations, and additional considerations. The thoughts were very helpful, so I wanted to share some of them with everyone.
Market Conditions
Nickel suggested that depending on the market, sometimes more expensive houses fell further in value than the less expensive houses; so our gain would be less than anticipated.
Luckily we’re in an area that hasn’t really been affected by the major housing market collapse. In fact, our area actually increased over the last year. The Zillow Real Estate Market Reports has a fun map to check on the housing market in your area. He also reminded me:
It’s not all about the money. If you really like your current house/neighborhood, then it may well be worth the extra cost.
Ron shares what is going on in his market. He would love to consider downsizing but the homes are selling for far less than what he would like … if they’re selling at all. He adds:
In the last quarter, only one existing home in my price range was sold and it was on the market for 9 months. Only 3 new homes sold in that same price range. The real question is, what could you get for it if you did put it up for sale and how long would it sit there?
School System
Sara l reminds me to consider if the schools in the next neighborhood over are the same (or as good as) as our current schools. She’s got a great point. One of the reasons that we chose this neighborhood and town was because of the terrific school system. That doesn’t show up on any kind of financial comparison… because it’s priceless!
This one really hit home in our discussions this weekend. Both Scott and I are big fans of education, and I’m more than willing to pay a premium to send our kids to a good school. She also shared her story:
We recently upsized (rental condo to first house), but we did so with many of the same considerations. Our outlook was we’d be there for 7-10 years and bought a house to accommodate our future plans (namely kids). Our house for current family size is a little crazy but will balance in a year or so.
The Future
Howard wants me to think about the future. Our house is too big for us now, but what about when our children get older. He has a great point… would we downsize now… only to rebuy a bigger house in another 5 years? Don’t forget to throw in the added pain and cost of moving. He also reminds me to think about the appreciation:
What about future appreciation? You know as well as anyone if both places appreciate at the same rate, the bigger place now will be worth far more in the future.
The Money
Four Pillars doesn’t think it would be worth it. He reminds me that buying a house for $100,000 less is not worth it, especially after all the fees and costs; as I would only lower my mortgage by about $80,000. He adds with a smile:
You have another kid on the way – just keep ‘em coming! That house will fill up in no time.
Adrienne suggests to try to refinance our current house anyways. I should mention, we actually have a great rate, at 5.125% with what I consider a perfect ten year mortgage. Although it would be nice to get a lower rate, it won’t break the bank if we don’t refinance. She says:
Check several lenders. I’m sure you can find one who would count your income. I also have less than 2 yrs of self-employment and each lender reacted to that differently (from straight no to it not being an issue.)
Reader Stories
Many readers shared their own personal stories. Their choices and rationale are helpful for anyone on the fence!
Golfing Girl shares:
For all the reasons you listed we are so glad that we downsized from the beginning. We were approved for $400K but ended up with a great little place for $160K. Now the only reason for us to move will be to change school districts. But our property taxes are lower and our energy bills are fabulously low. Plus no stairs to carry laundry or groceries up and down!
Small Steps to Health just bought their first house a few weeks ago:
Had it in our heads to purchase a small house so that if one of us get laid off, we can still afford the house. We ended up with a huge house in a pricey neighborhood that we would never have been able to afford a few years ago. Once you start shopping, I think it might be a little hard to resist some of the bargains on the market right now.
Staci is in the exact opposite situation. They are outgrowing their two bedroom house and thinking about upgrading. Here’s why they decided to wait:
- Mortgage is currently paid off, buying bigger would have a big impact on our cash flow.
- Our location to work. Moving to a bigger house would mean buying another car, lunch at the office.
- We love our neighbors/hood.
- We finally have our house how we want it.
- A smaller house is cheaper to live in.
- We don’t have to buy stuff to fill it up.
Meagan says they are currently asking themselves some similar questions. They own a home, but purchased a lot last year with the intention of building a house. However, finding out they were expecting a baby, and the uncertain economy has made them a little skittish about building, since they could live fairly comfortably live in their current home for quite awhile. She’s asking herself a lot of great questions:
- Can we truly afford the new payment and the other incremental costs?
- What happens if we don’t sell our current home right away?
- And we haven’t even really tackled the costs and time commitment associated with the new baby or the fact that I don’t intend to return to work full-time.
- Why not wait a year or two and see how things shake out?
Action Plan
You’ve all given us a lot to think about. We talked about it a lot over the weekend, but haven’t made a final decision… we’ll keep you posted!
Thanks for the link – let us know what you decide.