Ask the grumpies: When to upsize or downsize a house

First Gen American asks:

When do you downsize, upsize, etc. When you can no longer afford the house you live in, how long do wait until you make the decision to sell. (Due to a life change..job loss, stay home with kids, etc)

We got nuthin’ for this one.  We’ve never been in that situation and never wanting to be in that situation means we haven’t bought as much house as we could afford or bought a house at all and we’ve always had lots of money in the bank.

So yeah, we’re not the people to answer this question.

The people we know who have been in this situation have generally not made the decision to sell at all– just the decision to short-sell or foreclose when forced.  On the internet, we’ve seen people take in housemates to help pay the rent, though IRL I don’t really know of this happening.  People we know tend to upsize over time and only downsize when their kids go to college or they get divorced.

It’s a good reason to live under your means and to lifestyle inflate slower than you can afford to!

#2 notes:

I have definitely moved, but not for can’t-afford-it reasons.

I got a bigger place when my partner joined me in Blasted Place after three years there alone; my place was fine for me but wouldn’t have been enough room for the two of us. We downsized when we moved to Paradise because Paradise is expensive.

#1 says:

Yeah, when moving across country we’ve sometimes moved into smaller but more expensive places (see: our current rental).  But we’ve never sold a house!

Once again, does the grumpy nation have a better response than our poor one?  It must…


24 Responses to “Ask the grumpies: When to upsize or downsize a house”

  1. chacha1 Says:

    I have never owned a house* and my rentals have steadily increased in price over the years, so I also am not an “experienced” source for an answer to this query. But generally: the instant you can establish that something is going to be too expensive for the foreseeable future, get rid of it. I don’t see any upside in accumulating losses.

    *and perhaps the biggest reason is this very question. When a rental gets too expensive, one just packs up one’s crap and moves.

    • nicoleandmaggie Says:

      This is actually one reason why #2 would like to own. Rentals keep going up and up and up and up. There’s no place in this area that has lower rents for similar quality. But owning is impractical right now.

      • chacha1 Says:

        I should have clarified – I have voluntarily moved into more-expensive rentals over the years. :-)

        Our current place (we’ve been here since 2003) has increased from $2100/mo to $2575/mo over 12 years, which is not really a terrible rate of increase given that, by law, they could have been raising it by more than $200 each year.

        And also given that, in the current market, moving to a different (not necessarily new), somewhat-comparable unit would increase our rent right off the line to roughly $3750. As long as we are so far under market, we are staying put.

  2. Leah Says:

    I agree that it’s hard to know. Buying the right size house (one that’s not too big or not a big financial stretch) is so important for avoiding issues down the line. But if you currently have a house that is causing financial difficulty, and there’s no immediate end in sight (as in, you’ll shortly be starting a much higher paycheck job), then it’s time to downsize and minimize your losses.

    In terms of when to upsize — hold off as long as possible. Work on organizing better, decluttering, etc. People expand to take up the space they have available. It’s much harder to downside. Do not upsize until you absolutely have to, like when you live in a 2 bedroom, 1 bath but have multiple kids.

    • nicoleandmaggie Says:

      We bought a house that’s too big, but not enough too big for us to bother selling and finding a new place (plus we like the neighborhood). Financially it’s not a big deal because housing is so cheap where we usually live, but we just don’t use about a third of our house. (And it is a drain on heating/cooling/etc. bills.)

      • Leah Says:

        Why did you choose to buy that house? Did you realize at the time that it is too big?

        My parents also bought a house that is too big, but they also can afford it, so it’s okay. I think it is hard to get the perfectly right house size given other parameters on house hunting. I suppose maybe I should have said “don’t buy a house that is remotely close to ‘too expensive’ or otherwise a stretch to afford.”

      • nicoleandmaggie Says:

        We were naive– we had been living in small urban apartments for 6 years and didn’t really understand that 2200 sq ft, for example, would be plenty big enough even after having kids.

        What happened was we had a 55K downpayment (enabling us to get a 265K house using the 20% down rule + fees). I had a salary that would enable us to buy a 300K house (give or take) according to online calculators (thank goodness DH hadn’t gotten a job offer yet). And finally, a 30 year mortgage with ~50K down at the going interest rate on a 265K house was less than what we had been paying in rent for a far smaller apartment in the city. All of those combined led us to buy the nicest house we could find that cost $265K or under. Somehow our real estate agent managed to guide us to a gorgeous 3000 sq ft house that was nicer than any other house just outside of our price range, and somehow the negotiation ended up with it being exactly 265K. (By somehow, I’m pretty sure our real estate agent told their real estate agent that that was the last penny we could afford and we would go with our second choice 250K place.)

        This is a post of its own. I wonder if I’ve already written it. If not I should put it as a mortgage post one of these months. Just because everything aligns to make it seem like you can afford a 3000 sq ft house doesn’t mean you should actually buy one.

      • Leah Says:

        woosh, that is a lot of space! It will be nice when your kids are teens, but it’s a drag to have such a big house until then.

        We are up for a bigger apartment, and it looks like the one we should get (if everything falls into place correctly) would be 2x or more the size of ours. Everything thinks I must be over the moon. I sort of am, but I also keep thinking “man, that’s a lot of place to clean.” What I’d really just like is another bedroom and bathroom on our apartment. We’ll see how it goes.

      • Rosa Says:

        there is so much cultural pressure to buy a big house. It’s insane. Have I talked about my partner’s conviction that, since all the adults he knew did and seemed to enjoy yard work, it was an inevitable part of growing up and he’d hate it less if we owned our own house. Not true! We do know people who enjoy mowing lawns and weeding gardens but they’re a marked minority that does not include us.

  3. First Gen American Says:

    I guess I made sure we answered all the “what if” questions before making the decision to upsize. (What if I lost my job, what if we had to move, what if we couldn’t sell, etc). The first time we asked those questions, I realized we needed a bigger down payment saved before pulling the trigger.

    I haven’t downsized yet, so I am not sure the thought process there. I suppose if you have the luxury of time there may be something to be said about waiting it out until market conditions are good for selling. But sometimes it’s hard to time these things.

    • nicoleandmaggie Says:

      What ifs are important! The people I see getting into money troubles online generally don’t deal with them. On Monday you will possibly see an old rant that we wrote on that topic. (Unless #2 writes up her why you should donate to Planned Parenthood post for Chacha this weekend.)

  4. Jay Says:

    We downsized about 15 years ago. We waited a long time to buy our first house and we thought it would also be our last house. It wasn’t the house that was really too big – it was the two acres of land and upkeep on same and the killer commute that did us in. We agonized for two years and then I changed jobs and took a big income hit. We knew that was temporary and could have managed but it just wasn’t worth it for a house that wasn’t working. So we didn’t really sell because of money troubles.

    Part of the agonizing was our sense that if we sold the house, it would mean we’d made a TERRIBLE AWFUL MISTAKE and thus FAILED at – something. Something BIG AND IMPORTANT. I mean, we bought our dream house and – how can you be wrong about a dream? I don’t regret buying that house and I don’t regret selling it. We learned a lot. I don’t think we’ll ever take on a major commute again, for one thing.

    Our income has rebounded nicely and we’re still living in our “downsized” house (which is plenty big for the three of us and perfectly located). Our mortgage payment is less than 20% of my take-home pay and we’re a two-income household, so we can keep the kid in pointe shoes without a second thought (they are essentially disposable. Erp). My advice is that you consider selling when the house stops working for you, and it’s worth the forethought to figure out if it’s really going to work in advance.

    • nicoleandmaggie Says:

      Yeah, we also learned a lot from our first home purchase. Like corner lots suck. And just because you can afford a big house doesn’t mean you should get one.

      I’ve noticed that dream houses and dream jobs never seem to quite fit reality if they were dreamed in advance. It seems to be better to be pleasantly surprised that a house or a job turns out to have been a dream house or dream job.

      • jlp Says:

        Wait, what’s the downside to a corner lot? Living in an urban environment where the houses are all of 10 feet away from each other, the potential additional sunlight seems like a huge plus (though admittedly, the additional sidewalk to shovel four months a year, a bit less).

      • nicoleandmaggie Says:

        Well, first there is a lot more lawn to take care of. The second thing is really a corner lot/Home owners association interaction. When you have a corner lot they pay a lot more attention to your lawn and if it is imperfect you get notice about it whereas less perfect lawns that aren’t at the cross of two streets (or three streets in our case) are given a lot more leeway.

      • Bardiac Says:

        And if you have to clear sidewalks of snow, you have more sidewalk to clear. In some areas (mine), corner lots also get hit by higher taxes, especially when they fix a street and then raise property taxes for folks on that street to pay for it over 10 years. (Which they do here.)

    • Rosa Says:

      when we bought our house and had a little “what if we made a wrong decision” crisis, my mom said “it’s just a house, you can always sell it.” And then the housing crash hit. Luckily we always could afford our house – because for close to ten years, we would have taken a big financial hit if we sold. We could have afforded the hit if we really wanted out, but if we really needed out we wouldn’t have been able to afford the loss either!

  5. Catwoman73 Says:

    We bought a big house with the idea that we would have more children. Unfortunately, that didn’t happen, and now we have this big, relatively empty house. Couple that with the fact that the market has been very favourable (if we sold now, we would make a great deal of money!), and we are thinking that now might be a very good time to downsize. Ummm… that’s not quite right… I think it’s a good time to downsize. Hubby is still considering the idea.

    This house is our second home. Our first place was much smaller. Like I said before, we upsized in anticipation of needed the space. In hindsight, we should have waited until we KNEW we would need more space. Our old house has doubled in value from when we bought it, and we would have almost no mortgage now had we stayed where we were. I do have regrets (obviously), but since we can’t erase the past, we are just making the best of the situation we are in now.

    Basically, I guess I’m saying to upsize for the right reasons- not just because it is what people do- and never buy more than you can truly afford (based NOT on what the bank says you can afford, but on what YOU say you can afford, based on your lifestyle, not just your income). I have similar advice for downsizing- do it when you no longer need or want the space you have in your current home, AND when the market is favourable. Of course, downsizing is something to consider in situations like sudden income loss as well, but whether or not downsizing is necessary entirely depends on your financial situation (ie- how much you have in savings), and how likely it is that your situation will turn around before your savings run out.

  6. Debbie M Says:

    I got a smallish house figuring I’d move into some future husband’s bigger house later and then rent my house to students.

    Well, now I really like my house, especially the location, and wouldn’t want to move to any of the bigger, nicer houses my friends have. And my very-long-term boyfriend also loves the location but wishes we had a giant castle with a fifty-car garage or something. He does have a bigger income than I do, as expected, when he’s employed. But his employment is not super reliable. So we’re staying and thinking about expanding when we get the cash for it.

    I also wonder what we’ll do when(/if) we’re old and half broken. Will we be able to afford to hire people to do things like keep the lawn mowed? Not sure. Our current location is getting gentrified, so there’s no big rush to escape while we still can.

    I’ve learned that even though my personal needs have not really changed much since I bought my house, other things have–who I’m with and what’s getting torn down and built in my neighborhood. So far, my neighborhood is mostly better. But I don’t like the way closing costs eat up so much money when you buy and sell houses. I don’t see buying another house ever, but I do see allowing any future husbands to have a say in this matter, so no telling.

    To answer your question, if your life change makes it obvious you’d like a lower-cost housing situation indefinitely (even if you might be able to afford more again later), try selling ASAP. However, if it’s something like job loss and you’re trying to get a new (or better) job, so things could get better at any time, that’s super tough. It might be useful to know how long you’d be able to keep a house in the worst-case scenario. You definitely want to sell while it’s still yours if possible rather than get it repossessed.

  7. Susan Says:

    One way I would approach the decision would be transaction costs (realtor, moving, closing fees, keeping house clean while on market) and calculate a break-even point. If the slump in income is temporary, like staying at home with kids, it may well be worth gritting through.

    Another way is to remember 2008. Don’t take your basic ability to sell for granted (realize the gains while they still are gains, and when the market is fluid), and consider taking advantage of your ability to time a sale by putting it on the market in May instead of December, for instance. Choosing to sell gives you options that people who have to sell don’t have, so maximize that.

  8. Jenny F. Scientist Says:

    We bought a large (3100 sf, 1 acre) house when I was five months pregnant with Surprise Baby (#3). It also has a 500 sf screen porch and a 400 sf workshop. I wanted a smaller house but we live in a rural area with 24,000 people in a 600 square mile county, so the choices were limited and dangerous icy commuting through mountains was a factor. Also, the spouse’s employer issues mortgages at about 80% of the going interest rate and offers very advantageous terms including low loan-associated fees, and these continue even if one is no longer employed. The owner sold direct to us, without her having a realtor, which lowered costs; out realtor gave us a steep discount on his fee. We wanted a house big enough for two adults and three teenagers, with work space for both adults, room for our frequent guests to stay, and enough land to accommodate my gardening habit. We didn’t want to have to move again until after we’re retired in about 40 years. So we’ll have a few years where we feel we overbought, but then hopefully it’ll be better. Note: it is not unaffordable, we just won’t be taking a family European vacation every year. This was an upsizing for the very long term. I suppose we ran through all the what-ifs and did a lot of budget calculations and this seemed the most reasonable option. We also looked at 32 houses in person before buying, which was useful in assessing our needs and desires vs. what we could realistically make happen here.

    I should add that the year before we bought, we were living in a 1000 sf apartment with no yard or garden. This told us that it was unsustainable long term.

  9. gasstationwithoutpumps Says:

    My father’s house was sold a year after he moved into a retirement apartment in a different state, which happened a couple of years after he stopped driving—the family house was in a midwestern suburb with poor transit. He now lives in Boulder, close to two of my siblings. The house was sold by another sibling, who still lives in the midwest.

    I hate moving, so I’ve been living in the same house for 29 years—stuff really accumulates, and it looks like something from Hoarders now.

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