For empty-nesters and other homeowners who are considering downsizing, a move to a smaller place could add quite a bit to your next egg, depending on where you live.
Anyone who has owned their home for more than a few years has likely built some equity. But boomers, or anyone who purchased their homes 20, 30, or 40 years ago, are sitting on a gold mine.
U.S. homeowners are sitting on an unprecedented $8.1 trillion in home equity, Money.com reported last year, and the boomer generation, many of whom have lived in their homes for decades–and in some cases paid off their mortgage–is especially well-positioned to gain from their home equity.
The price of real estate in the U.S., though it has its ups and downs, has risen overall since the 1970s, when the median sales price was about $24,000, according to the St. Louis Federal Reserve. Over the ensuing decades, the median sales price in the U.S. was:
in 1980: $64,000 in 1990: about $120,000in 2000: about $172,000
The peak median sales price of 2007 was $257,400 and the low of 2009 was $208,400.
Since then, the median sales price has risen to $454,900 in the third quarter of 2022.
For empty-nesters and other homeowners who are considering downsizing, the number crunchers at StorageCafe, an online platform that provides storage-unit listings across the nation, roughed out how much cash you can get your hands on if you move from a 4-bedroom home to a cheaper 2-bedroom home.
The big winners are in some of the most expensive markets like San Jose, Calif. and San Francisco. In San Jose, the median value of a 4-bedroom home, according to Zillow (Z) – Get Free Report, is $1.9 million, while a 2-bedroom is $1 million. A homeowner could theoretically downsize to that smaller home and clear $777,426, accounting for closing costs and property taxes, according to StorageCafe’s research.
That’s a decent chunk of change to add to your nest egg.
To find the cities where homeowners could save the most from downsizing from a 4-bedroom to a 2-bedroom, StorageCafe looked at the country’s 100 largest metropolitan areas by population and ranked them by the amount of savings. They used Zillow’s Home Value Index for prices, and factored in closing costs and property taxes.
Median taxes for 4-bedroom homes were calculated by multiplying the median taxes across all properties by the ratio of 4-bedroom home values to all home values, and the same was done for 2-bedroom homes.
Closing costs were calculated as 8% of the average home value for a 4-bedroom home (selling costs) and 3% of the average home value for a 2-bedroom home (buying costs).
Downsizing savings represent the home value difference between a 4-bedroom home and a 2-bedroom home plus tax savings per 10 years, minus the closing costs.
The savings is based on a cash transaction, the numbers do not account for a mortgage, which could change your savings depending on your current rate.
Here are the cities where downsizers could save the most.
1. San Jose-Sunnyvale-Santa Clara, Calif.
Downsizing savings: $777,426
4- bedroom home value: $1.9 million2- bedroom home value: $1 million4- bedroom median taxes: $9,9582- bedroom median taxes: $5,249Closing costs: $185,573
In California, property taxes typically are based on assessed value rather than current fair market value, and homeowners over 55 who locked in low tax rates decades ago can take their tax assessment with them to a new property.
2. San Francisco-Oakland-Berkeley, Calif.
Downsizing savings: $563,113
4- bedroom home value: $1.8 million2- bedroom home value: $1.1 million4- bedroom median taxes: $9,1002- bedroom median taxes: $5,598Closing costs: $181,553
3. Honolulu, Hawaii
Downsizing savings: $519,361
4- bedroom home value: $1.2 million2- bedroom home value: $607,5144- bedroom median taxes: $2,7332- bedroom median taxes: $1,350Closing costs: $116,597
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4. Bridgeport-Stamford-Norwalk, Conn.
Downsizing savings: $462,911
4- bedroom home value: $829,8112- bedroom home value: $356,4234- bedroom median taxes: $11,6742- bedroom median taxes: $5,014Closing costs: $77,078
5. San Diego-Chula Vista-Carlsbad, Calif.
Downsizing savings: $340,221
4- bedroom home value: $1.1 million2- bedroom home value: $688,1344- bedroom median taxes: $5,8952- bedroom median taxes: $3,636Closing costs: $109,897
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6. Los Angeles-Long Beach-Anaheim, Calif.
Downsizing savings: $330,995
4- bedroom home value: $1.2 million2- bedroom home value: $728,2164- bedroom median taxes: $6,1462- bedroom median taxes: $3,890Closing costs: $113,890
7. Miami-Fort Lauderdale-Pompano Beach, Fla.
Downsizing savings: $322,231
4- bedroom home value: $678,6362- bedroom home value: $317,1584- bedroom median taxes: $4,6112- bedroom median taxes: $2,155Closing costs: $63,806
8. Seattle-Tacoma-Bellevue, Wash.
Downsizing savings: $297,573
4- bedroom home value: $976,9242- bedroom home value: $604,6334- bedroom median taxes: $5,6622- bedroom median taxes: $3,504Closing costs: $96,293
9. North Port-Sarasota-Bradenton, Fla.
Downsizing savings: $295,039
4- bedroom home value: $730,8642- bedroom home value: $381,9334- bedroom median taxes: $3,3592- bedroom median taxes: $1,755Closing costs: $69,927
10. Oxnard-Thousand Oaks-Ventura, Calif.
Downsizing savings: $285,189
4- bedroom home value: $974,0832- bedroom home value: $613,2374- bedroom median taxes: $5,5792- bedroom median taxes: $3,512Closing costs: $96,324
11. Boston-Cambridge-Newton, Mass.-N.H.
Downsizing savings: $274,699
4- bedroom home value: $839,0812- bedroom home value: $510,7174- bedroom median taxes: $7,3552- bedroom median taxes: $4,477Closing costs: $82,448
12. Stockton, Calif.
Downsizing savings: $272,318
4- bedroom home value: $687,1832- bedroom home value: $367,7934- bedroom median taxes: $4,0742- bedroom median taxes: $2,181Closing costs: $66,008
13. Nashville-Davidson-Murfreesboro-Franklin, Tenn.
Downsizing savings: $261,796
4- bedroom home value: $654,4912- bedroom home value: $341,5884- bedroom median taxes: $2,4052- bedroom median taxes: $1,255Closing costs: $62,607
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14. Durham-Chapel Hill, N.C.
Downsizing savings: $253,797
4- bedroom home value: $606,8572- bedroom home value: $312,2324- bedroom median taxes: $3,5202- bedroom median taxes: $1,811Closing costs: $57,916
15. New York-Newark-Jersey City, N.Y.-N.J.-Pa.
Downsizing savings: $247,999
4- bedroom home value: $700,1662- bedroom home value: $423,2234- bedroom median taxes: $10,0542- bedroom median taxes: $6,077Closing costs: $68,710
16. Raleigh-Cary, N.C.
Downsizing savings: $247,282
4- bedroom home value: $588,9612- bedroom home value: $300,0014- bedroom median taxes: $2,9432- bedroom median taxes: $1,499Closing costs: $56,117
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17. Dallas-Fort Worth-Arlington, Texas
Downsizing savings: $245,720
4- bedroom home value: $516,6612- bedroom home value: $254,4924- bedroom median taxes: $6,4082- bedroom median taxes: $3,157Closing costs: $48,968
18. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.
Downsizing savings: $244,336
4- bedroom home value: $685,7332- bedroom home value: $39,7544- bedroom median taxes: $5,4332- bedroom median taxes: $3,149Closing costs: $66,782
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19. Birmingham-Hoover, Ala.
Downsizing savings: $242,647
4- bedroom home value: $377,6822- bedroom home value: $11,20614- bedroom median taxes: $1,5082- bedroom median taxes: $447Closing costs: $33,576
Sean Pavone / Shutterstock
20. Knoxville, Tenn.
Downsizing savings: $241,495
4- bedroom home value: $486,3252- bedroom home value: $210,0174- bedroom median taxes: $1,8292- bedroom median taxes: $790Closing costs: $45,207
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21. Memphis, Tenn.
Downsizing savings: $241,074
4- bedroom home value: $360,8682- bedroom home value: $107,3314- bedroom median taxes: $2,7932- bedroom median taxes: $831Closing costs: $32,089
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22. Detroit-Warren-Dearborn, Mich.
Downsizing savings: $236,722
4- bedroom home value: $422,4392- bedroom home value: $177,8324- bedroom median taxes: $5,3962- bedroom median taxes: $2,272Closing costs: $39,130
23. Kansas City, Mo.-Kan.
Downsizing savings: $229,039
4- bedroom home value: $411,8872- bedroom home value: $166,8624- bedroom median taxes: $3,6932- bedroom median taxes: $1,496Closing costs: $37,957
24. Greensboro-High Point, N.C.
Downsizing savings: $226,610
4- bedroom home value: $388,8632- bedroom home value: $143,8644- bedroom median taxes: $2,7042- bedroom median taxes: $1,000Closing costs: $35,425
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25. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
Downsizing savings: $225,257
4- bedroom home value: $502,9692- bedroom home value: $263,0304- bedroom median taxes: $7,0112- bedroom median taxes: $3,667Closing costs: $48,128
26. Baltimore-Columbia-Towson, Md.
Downsizing savings: $224,327
4- bedroom home value: $500,6752- bedroom home value: $251,6524- bedroom median taxes: $4,6062- bedroom median taxes: $2,315Closing costs: $47,604
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27. Charlotte-Concord-Gastonia, N.C.-S.C.
Downsizing savings: $218,657
4- bedroom home value: $511,8092- bedroom home value: $257,1394- bedroom median taxes: $2,5412- bedroom median taxes: $1,277Closing costs: $48,659
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28. Pittsburgh
Downsizing savings: $217,117
4- bedroom home value: $366,0472- bedroom home value: $144,9324- bedroom median taxes: $4,9062- bedroom median taxes: $1,942Closing costs: $33,632
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29. New Haven-Milford, Conn.
Downsizing savings: $216,410
4- bedroom home value: $462,4942- bedroom home value: $241,7684- bedroom median taxes: $8,3682- bedroom median taxes: $4,374Closing costs: $44,253
30. St. Louis
Downsizing savings: $215,703
4- bedroom home value: $383,0092- bedroom home value: $155,9374- bedroom median taxes: $4,0402- bedroom median taxes: $1,645Closing costs: $35,319
See the ranking of all 100 metro areas and more about the methodology of this study at StorageCafe.com.
