As the baby boomer generation hits retirement and starts to think about downsizing, it appears that demand for smaller homes is growing significantly.
For many years, the trend was always in the other direction – people wanted bigger and bigger houses. The average size of a new home in 1973 was 1,660 square feet. That number increased almost every year after that, hitting 2,521 square feet in 2007. Since then, however, there has been a decline, with the average size sliding to 2,392 square feet in 2010. Most homebuilders predict the average size will continue to decrease.
In a recent survey, some 43% of Americans age 50-64 said they planned to move in the next few years – a real surprise given that this is usually the most stable group of homeowners. And of those who planned to move, fully 50% said they planned to downsize to a smaller home.
One reason may be that more Americans nearing retirement have significant amounts of mortgage debt, and downsizing can be a good way to eliminate or reduce this debt.
For instance, more than 50% of couples age 55-64 still have a mortgage today, compared with less than 40% in 1989. For couples age 65-74, some 40% still have a mortgage, almost double the 1989 rate.
And the amount they owe on their mortgages is far greater. For people age 55-64, the average mortgage debt is almost $100,000, up from about $35,000 in 1989. For people age 65-74, the average debt is about $50,000, which is roughly triple the 1989 rate.