When you trade your home for a smaller one, you typically expect smaller monthly bills, too.
But that’s not always the case. While in many US cities downsizing will save you big bucks, it could cost you in others, a recent report by StorageCafe found.
Across the country, the average downsizer saves about $200,000 over a decade — more than half the cost of a typical American home.
To create its index, StorageCafe compared the cost of four-bedroom versus two-bedroom homes, factored in a decade of median property tax savings, and subtracted typical closing costs and self-storage costs in about 90 of the country’s biggest cities.
Downsizing is the best deal across the South — the report found 13 of the top 20 US cities for downsizing gains relative to home value were in the region. That’s in part because suburban home values are on the rise, while Southern cities are building new homes at a quicker pace than most parts of the country.
“In many of these cities, both home prices and general living costs are lower than the national average, which means that the funds freed by downsizing represent a much larger share of the typical local home, and the cash-out is often enough to reset a household’s financial footing entirely,” the report’s author, Maria Gatea, wrote.
In Dallas, which topped the list, the typical four-bedroom home costs about $614,000, while the typical two-bedroom costs about $230,000. With tax savings, closing costs, and storage over 10 years factored in, the savings from downsizing were nearly $373,000. Those savings are about 120% of the price of an average Dallas home.
Downsizing also pays off in the Midwest and Rustbelt, where larger homes are selling at a premium and smaller homes are still relatively affordable.
But in cities like Cleveland and Philadelphia, the typical downsizer would lose thousands of dollars by shrinking their square footage. In the Ohio city, the average downsizer would lose about $25,000 over a decade, while in the Pennsylvania metropolis, the loss would be about $6,000.
While downsizing in expensive California cities like Irvine and San Jose means big cash savings, that money doesn’t buy as much house as it would in other markets.
As millions of baby boomers hit retirement and think about moving into smaller, more accessible, and more affordable homes, they may want to consider the conditions for downsizing in their area.
But it’s not just older people who are downsizing. Many Gen Zers and millennials want to save on housing costs and simplify their lives in smaller abodes — or even tiny homes.
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