Why Many Americans Aren’t Downsizing Their Homes in Retirement

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.