A downsize may feel like a good idea if you want to simplify your life and clear out the cobwebs. A downsize could be due to a breakup or as conscious decoupling, as Gwyneth Paltrow likes to call it, where two folks generally split the equity in their home in order to buy something of their own. Generally though, downsizing these days is largely related to the Boomer generation after their kids have left (for good this time), and they are ready to make life a whole lot easier by going to a smaller home.
Since the Boomer generation does carry some demographic heft, many have speculated that a large number of Boomers who sell their homes around the same time will cause a huge disruption in the real estate market. More pointedly, many have wondered: If the boomers begin to sell their homes all at once, could this lead to a rush of supply and a crash in the Toronto real estate market or any market in North America? For the most part, Boomers own most of the large homes in the market. The Gen Xers and Millennials behind them are in much smaller places, particularly here in Toronto. I have certainly played a part in many Boomers downsizing from a larger home to a smaller condo or bungalow which can be more easily managed.
When I ask why they are downsizing, I receive similar responses. The most popular being:
- Maintenance Free No more (or a lot less) grass-cutting, driveway shoveling and housecleaning.
- More Fun in the City A desire to be closer to entertainment, sports, a selection of restaurants, their kids, their downsized friends, manni/peddies, walkable gyms and tai chi classes.
- Freeing Up Funds If Boomers have built equity in their home, as many have, they can enjoy that extra money from downsizing to travel more or spend more time South in the winter or a cottage in the summer.
The thing is, many Boomers have not retired yet, and many may work past the age of 65. So, this demographic shift isn’t happening as many have expected. In fact, many Boomers are buying even larger homes because the younger Boomers may still have kids. They just want more space, or they are staying put in their own homes because they don’t want to move. Many like to have those extra rooms in case one of their kids boomerang back between university and a job or their parents move in. Some even like the extra rooms for visiting friends.
Because Boomers are not downsizing or even moving, the Millennials are having a hard time buying property because there is a chronic shortage of supply in Toronto. We can’t really blame Boomers for this. It’s not their fault, but they do have the power to make a market much more affordable if they decide to sell. It’s a funny situation.
On one side you have a message that the Boomers will cause the market to crash when they decide to divest of their homes en mass as they retire. On the other side, the side we’re currently on, the Boomers are not moving on, and they may not even move on at all in large numbers any time soon.
Statistics tell us that many Boomers are still in their working years. So, there is not much interest in downsizing yet. This may change soon and very quickly.
Regardless of what happens, I think I would like to offer up a few tips to the Boomers concerning their properties:
- One Storey If you do decide to downsize, try to buy something without a lot of stairs. At a certain age our knees will not be as kind to us. So, think ahead on that one. If you’re going to buy a bungalow, make sure you buy a condo bungalow where you can have someone else worry about the maintenance.
- Don’t Do it If You Don’t Want To Even if you are one person living in a giant 5 story house, you don’t have to sell it. If you love your garden and you have great memories that you prefer to keep near, then stay put. As long as you can have someone take care of things as you age and all of your wealth is not tied up in your house, then no need to move. It’s your life after all!
- If Going To Toronto, Don’t Wait Too Long There is a shortage of every kind of housing stock in Toronto, but the larger condo is particularly in short supply. Toronto mostly built a lot of 1 bedroom condo apartments in the last ten years. For the small stock of larger 2 bedroom or more condo units that Boomers love, there will be competition from other Boomers and Millennials who are priced out of buying a starter house. That’s a lot of people looking to buy very few large Toronto condos.So, these may be pricier in the future.
- Sell if you Need the Money If your well being or retirement is caught up in your home, you may want to sell. This is a suggestion to the Boomers who may fall into the last 5 years of the Boomer cohort. If you are between 65 and 70 years old and most or all of your wealth is caught up in real estate, then you may not do well if the market tanks. I’m not saying the market will tank, but it is always possible. If it does, it could be ten or more years before you recover your equity; and if that’s the case, you won’t be enjoying your retirement much.
- Don’t Feel Guilty Yes, the Millennials and Gen Xers are waiting in the wings to buy your bigger property, but it’s yours. It doesn’t matter if you bought it for a tenth of what they will buy it for, it’s yours and you can do what you like with it when you want.
Like the real estate market at large, I’m not hear to tell you when or why you should downsize, if you downsize at all. I am, however, here to suggest the best way to downsize, if you want or must choose that path. Downsizing may feel to some like they are losing space, but many of the downsizers I have helped buy properties see it more as a way to reduce the responsibility that comes with a house. They can then travel more easily or go South for the winter for a longer time. For downsizers, life is too short to do more housecleaning and driveway shoveling.