Why Many Americans Aren’t Downsizing Their Homes in Retirement

For decades, downsizing has been considered one of the most sensible financial moves for Americans approaching retirement. The traditional idea is simple: once children leave home and employment income comes to an end, retirees can sell a large family house, purchase a smaller property, reduce housing expenses, and use the remaining home equity to strengthen their retirement finances.

But the latest housing data suggests that this traditional retirement strategy is not as common as many people might assume.

Older Americans are moving, but many are not moving into substantially smaller homes. In some cases, they purchase homes that are nearly the same size as their previous property. Others move closer to family, relocate because of lifestyle changes, or choose homes that better accommodate their needs as they age.

This raises an important question for retirement planning: Is downsizing still a realistic source of retirement income, or should retirees think about their housing strategy differently?

What the Latest Housing Data Shows

The National Association of REALTORS® (NAR) found that Baby Boomers continue to play a major role in the U.S. housing market. In its 2026 Home Buyers and Sellers Generational Trends Report, buyers aged 61 to 79 accounted for 42% of home buyers, while Baby Boomers represented 55% of sellers.

However, being an older home seller does not necessarily mean moving into a much smaller property.

NAR's research shows that housing decisions among older Americans are often closer to "right-sizing" than dramatic downsizing. NAR reported that sellers over age 60 reduced their home size by roughly 100 square feet in 2025. The median purchase price for older buyers was about $409,000, compared with a median sale price of $433,000 for the homes they sold.

That is a relatively modest change compared with the common image of a retiree selling a large family house and moving into a much smaller apartment or condominium.

The pattern is important because many retirement plans assume that a homeowner will unlock a substantial amount of money by moving to a significantly cheaper property.

In reality, the financial benefit may be considerably smaller.

Why Downsizing Has Become Less Attractive

There are several reasons older Americans may decide not to dramatically reduce their living space.

1. The Family Home Still Has Value Beyond Its Square Footage

A house is not simply a financial asset.

For someone who has lived in the same property for 20 or 30 years, the home may represent family memories, friendships, community connections, and familiarity.

Moving to a smaller property can therefore involve more than selling an asset and buying another one.

It can mean leaving a neighborhood where someone has spent decades building relationships.

This is one reason that many retirees prefer to remain where they are, particularly when the home is already paid off or has a relatively low housing cost.

Freddie Mac's research found that 68% of surveyed Baby Boomer homeowners either planned to age in place or had no plans to move again.

For these homeowners, staying in the current property may actually feel more financially and emotionally attractive than moving.

2. Retirees May Want Space for Their Families

Retirement does not necessarily mean spending less time with family.

Grandchildren may visit frequently. Adult children may temporarily return home. Some families may eventually live together across multiple generations.

That can make a larger house useful even when the original children have moved out.

NAR has found that proximity to family and friends is an important factor in housing decisions among older Americans. In fact, older buyers are increasingly making housing decisions based on relationships and lifestyle rather than simply looking for the smallest possible property.

For some retirees, an extra bedroom or living area is not wasted space. It is part of the lifestyle they want during retirement.

3. Smaller Homes Aren't Necessarily Cheap

One of the biggest misconceptions about downsizing is that selling a large house automatically means buying a much cheaper one.

That is not always true.

A retiree might sell a four-bedroom suburban house and discover that a smaller, newer, low-maintenance property in the same desirable area is still expensive.

Condos and retirement communities can also come with homeowners association fees, maintenance charges, and other recurring expenses.

In some markets, the supply of affordable smaller homes is limited. Redfin has pointed to a shortage of reasonably priced smaller housing options for older Americans as one factor that can make downsizing difficult.

This creates an unusual situation: a homeowner may want to downsize but cannot find a replacement property that provides enough financial savings to justify moving.

4. Homeowners Have Built Significant Equity

Another major factor is the amount of wealth many Baby Boomers have accumulated through homeownership.

Freddie Mac estimated that Baby Boomers held about $17 trillion in home equity in 2024. Its research also found that roughly three-quarters of homeowners born before 1964 were likely to leave much of their home equity to their children.

That level of equity can give older homeowners considerably more flexibility.

They may be able to buy another property using a large down payment or even cash.

NAR reported that older buyers are much more likely than the overall buyer population to purchase homes without financing.

As a result, these homeowners may not have the same financial incentive to move into a dramatically smaller property.

Moving Doesn't Always Mean Downsizing

One of the most important distinctions in retirement planning is the difference between moving and downsizing.

A retiree may sell a home without necessarily reducing their living space.

For example, someone might move from a suburban area to a smaller city to be closer to their children. They could sell a 2,000-square-foot home and purchase another property of roughly the same size.

Financially, that person has relocated but has not meaningfully downsized.

NAR's research indicates that lifestyle and family considerations are important drivers of these decisions. For older Boomers, being closer to friends and family is one of the prominent motivations for moving.

Health and changing household circumstances can also influence the decision.

Someone might move because stairs have become difficult to navigate, for example, but choose a similarly sized single-story property rather than a much smaller home.

In other words, the goal may be better functionality, not simply less space.

The Difference Between Downsizing and Rightsizing

This is where the concept of rightsizing becomes useful.

Downsizing means deliberately moving into a smaller home.

Rightsizing is more about choosing a property that fits your current lifestyle and future needs.

For one retiree, that could mean moving from a 3,000-square-foot house to a 1,500-square-foot condominium.

For another, the right decision might be moving from a two-story house to a 2,000-square-foot single-story home.

The second person has not necessarily downsized dramatically, but the new home could be substantially better suited to aging.

This distinction is increasingly important as Americans live longer and spend more years in retirement.

A smaller house is not automatically a better retirement home.

A well-designed home with fewer stairs, accessible bathrooms, lower maintenance requirements, and proximity to healthcare or family could potentially be more valuable than simply reducing square footage.

What This Means for Retirement Planning

The biggest lesson for people planning retirement is that home equity should not automatically be treated as future retirement income from downsizing.

If your retirement plan assumes something like this:

Sell a large home → buy a smaller home → pocket the difference → use the money for retirement

you should make sure the numbers actually work in your local housing market.

Consider at least five factors.

1. Expected Sale Price

Estimate what your current home could realistically sell for rather than relying on optimistic online estimates.

2. Replacement Home Cost

Research the actual price of the type of home you would want after retirement.

A smaller property may not be proportionally cheaper.

3. Transaction Costs

Selling and buying property can involve commissions, closing costs, moving expenses, taxes, repairs, and other costs.

These expenses can significantly reduce the amount of equity available after a move.

4. Ongoing Housing Expenses

Compare more than the purchase price.

Look at:

• Property taxes
• Homeowners insurance
• HOA fees
• Utilities
• Maintenance
• Repairs
• Transportation costs

A cheaper home in an expensive or inconvenient location may not produce the savings you expect.

5. Future Accessibility

Think beyond the first few years of retirement.

A home that works perfectly at age 65 may not be ideal at age 80.

Features such as single-level living, accessible bathrooms, minimal stairs, and proximity to healthcare can become increasingly important.

Should You Downsize Before Retirement?

There is no universal answer.

Downsizing can make considerable financial sense when a homeowner has substantial unused space and can purchase a suitable replacement property for significantly less money.

It can also reduce maintenance responsibilities and potentially lower certain housing expenses.

But downsizing may be less attractive when the existing home is affordable, mortgage-free, well located, and already suitable for aging.

The decision becomes even more complicated when moving would mean leaving family, friends, healthcare providers, or a familiar community.

Instead of asking:

"How small can I make my house?"

a better question may be:

"What type of home will support the retirement lifestyle I actually want?"

That shift changes the decision from a purely financial calculation into a broader retirement-planning exercise.

Housing May Be a Retirement Asset, But It Isn't Automatically Retirement Income

For many Americans, their home represents one of their largest assets.

That does not mean the entire value of the property can easily be converted into spendable retirement income.

Home equity is relatively illiquid unless the owner sells, borrows against the property, or uses another financial strategy to access it.

This is particularly important for retirees who have substantial wealth in their homes but relatively limited investment or cash assets.

Instead of assuming that a future downsize will solve a retirement-income shortfall, homeowners should consider multiple scenarios.

For example:

• What happens if the home is sold for less than expected?
• What if the replacement property costs more than expected?
• What if moving expenses are substantial?
• What if the homeowner ultimately decides not to move?
• What if healthcare needs require a different type of housing?
• What happens to the home equity if the property is eventually passed to heirs?

Planning around these possibilities can produce a much more realistic retirement strategy.

The Bottom Line

The traditional idea that Americans automatically downsize once they retire is becoming less convincing.

Recent housing research shows that older Americans continue to buy and sell homes in large numbers, but their moves are often motivated by family, health, lifestyle, location, and accessibility rather than simply the desire for a smaller house.

Many Baby Boomers also have substantial home equity, giving them the financial flexibility to purchase another property without dramatically reducing their living space.

For retirement planning, the implication is straightforward: don't count on downsizing profits until you have actually run the numbers.

A smaller home can be an excellent retirement strategy, but it is only one option. For some households, staying put may be more economical. For others, moving to a different location or choosing a more accessible home may matter more than reducing square footage.

Ultimately, the best retirement home is not necessarily the smallest one.

It is the home that provides the right combination of affordability, accessibility, location, maintenance, and lifestyle for the years ahead.