Downsizing Your Home May Mean Upsizing Your Budget
People downsize their residence for many reasons. Here in Berks County, the principal causes are often age or cost related. There is now an ever-growing paradox in the housing market that is making it harder for downsizers to afford the move.
The Millenial Phenomenon
It was not long ago when many buyers could not find a large enough home to purchase. This movement of sorts gave rise to the McMansion. Many generation Xers found out that owning a rather large home came with a sizable property tax bill, larger utility bills, and more maintenance. In a way, many became slaves to all that home and expense.
Now we are post-recession, and the millennial class has entered the home buying market in force. Millenials seem to care more about their rights, freedoms, and the environment than owning the biggest home on the block. According to the National Association of Realtors, Millenials carry more college and general debt than any generation to date. This debt is another factor in how much house they will buy. In short, many Millenials want to keep their life options open, and this often means renting or buying a smaller, more affordable house.
The Downsizing Cost Paradox
It now seems we have two converging generational groups all vying for the same type of home, the Baby Boomers, and Millennials. Larger more expensive dwellings naturally have fewer buyers. The demand is now further negatively impacted by the push for smaller houses by the next or now generation of buyers. At the same time, as we discussed, Millenials are going after many of the same properties as Baby Boomers looking to downsize. This convergence of desire for smaller homes is further impacted by the low housing inventory creating a supply and demand issue that is driving prices for the smaller class of house ever higher.
The following statistics here in the Reading, PA and Berks County area will illustrate my point. Presently, there are 101 homes for sale in all Berks County priced at $500,000 or more. Only 17 have sold and settled since January 1st of this year. On the other hand, there are 207 homes for sale between $150,000 and $200,000, which is right near the median pricing for homes in our area. Since January 1st of this year, there have been 414 that have sold and settled, quite a difference. Many of the homes selling in the median price range have multiple offers and sell for more than the asking price.
What to Consider When Downsizing
When I meet with clients looking to downsize I advise them to look at the process with a different perspective. Instead of over focusing on the home they are selling, consider putting the focus on where they are going. In other words, read the book from the end to the beginning. This strategy has served my clients and me well over the years. Of course, it is essential to understand what your home is likely to sell for and be realistic about it.
Overall, the real estate market is favorable right now, but there is little outside speculation how long that will last, remember 2006. The realistic part is more comfortable to handle when you have a good idea of where you will be going. It is imperative to hire a real estate professional to assist in the process of getting the most out of your existing home and find your next.
It is more important where you start the next chapter of your life than the chapter you are leaving behind. With the right people helping you the best is yet to come. Having a good real estate agent can help you set and achieve your goals in what may be the most important time in your life.
Knowledge is Power!
Jeffrey C. Hogue