When I first met my husband, I remember being impressed that he was only 27 but already owned his first home. In the years since we've been married, we've built four homes together (yes, we stayed married through it all!) and always had a profit after each sale... until 2011, when we relocated to Charlotte. We all know how devastated the real estate market has been for the last 3 years, so we were fortunate to be able to sell our home after seven months on the market - and the longer you are trying to sell your house, the more accepting you become to lowering the price to a number you would never have considered when you first listed your home.
But buying a house in today's market can be daunting. It used to be a no-brainer: Buy, don't rent, so that you can gain the tax benefits and appreciation on your investment. Real estate has long been considered a prudent means of diversifying your assets; many used to see their equity as their "retirement nest egg". But in today's market, people in their 50s or older really have to pause and think about whether or not the investment makes sense for them.
Initially, it was very strange yet freeing to no longer have a house, with a mortgage, upkeep expenses, and grass to cut. We put most of our furniture and possessions in storage, keeping just enough to furnish the apartment we leased until we could really decide on our next step. Did we want to reinvest in real estate, given the material downturn? Was it time for a condo or townhome? Should we stay in the apartment and search for our ultimate retirement home? Is this the right time to buy for the right reasons or should we wait longer? These are among the questions my husband and I grappled with over the six months following the sale of our house, which marked the longest period of time we had rented, not owned real estate in our married life.
We found that as you near retirement, the real estate decision gets harder instead of easier. And it wasn't just about the real estate market. There were more personal issues. Do we take this opportunity to downsize? If so, what do we do with all of our furniture and family heirlooms currently in storage? Many of our furnishings were handed down from previous generations and carry significant sentimental value. There are items and belongings we want to pass on to our children, but they're not settled enough at this point to use or store these items.
Another "downside to downsizing" is determining where everyone will stay when they come to visit from out of town. At times like Thanksgiving and Christmas when we all spend time together as a family, it's important to me that we have enough room for everyone.
Determining whether or not to take on a mortgage close to or in retirement is another important consideration. Many people who choose to downsize are seeking to downsize living expenses as well as space. We could purchase a smaller home or condo and eliminate the need for a mortgage and realize other savings from lower utility costs, lower taxes and less maintenance.
When we were younger and raising our family, to buy or not to buy was never even a part of the decision making process. It was all about where to buy, how much room we needed and what the schools were like. So what to do?
We eventually made the decision that we wanted to downsize some but weren't ready for the condo or knew enough yet about where we might want to have our retirement home. We also decided to buy a house large enough to comfortably accommodate our "stuff" as well as our kids and grandkids when they come to visit. Only time will tell if we made the right decision but for us it feels just right. And we are now in unchartered territory, buying a 75 year old home close to the city center which needs some renovation!
It was an interesting process though. We found ourselves weighing a whole new set of criteria, balancing both rational and emotional factors that we'd given little consideration to before.
Have you recently been in a similar position--trying to determine if downsizing is the right choice or if you should rent instead of buy in or nearing retirement? I'd love to hear your thoughts and insights.
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