We retired and wanted to downsize to a smaller condo but prices have gone crazy – are we stuck in our house?

A retired Reddit user is trying to decide where to live in his later years. His spouse is retiring next year. When she does, they planned to sell their primary home, travel for a while, and then buy a condo with a stable association fee and maintenance schedule. Unfortunately, when the original poster (OP) started to research condos available in their area, they discovered that real estate prices had gone insane. So, despite selling a larger home, they’d likely walk away with around $800K and would have to pay around $1.2 million for a condo in the area where they want to live.

Given the high costs of condos now combined with the fact that mortgage rates remain high, the OP feels stuck in his home and believes that it will never make financial sense to try to trade out of their current property. The OP is wondering if he and his wife are stuck for life, and is trying to decide what to do next. 

Look at the big picture in terms of cost

The first thing that the Reddit user needs to do is to consider the big picture in terms of total costs. Obviously, it would not be ideal to have to spend an extra $400K to get the house that they want to live in during retirement. However, they also need to consider ongoing costs of ownership as well.

Would the condo come with lower property taxes, for example? Would their maintenance and utility costs be smaller? Could they get rid of one of their cars and downsize to a one-car household if they are moving to a more urban area?

The monthly cost of a mortgage is just one of many expenses and the OP may find that once they take all of these issues into account, the move actually does make financial sense in the end — especially if the couple is happier in their new place or if they are better able to age in place so they don’t have to move as they get older. 

Make sure housing costs are affordable

Whatever the OP decides, he also needs to make sure that his housing costs are going to be affordable over the long term. Whether he stays in his large current house or takes out a mortgage to buy a new condo, he can’t commit to a housing payment that he won’t be able to cover with his retirement income once his paychecks stop coming.

Ultimately, a lot depends on how much the Redditor actually has saved. If he has a hefty retirement nest egg and more than enough income coming from Social Security and savings, then he can buy the condo if he wants to do it, even if it increases his housing costs a little bit. Retirement is a time to enjoy your life and as long as it doesn’t put you over budget and at risk of running out of money, you deserve to live where you want in your later years. 

He should look carefully at his budget, decide on a safe withdrawal rate, and make sure that his housing situation is financially sustainable. Once he has decided how much income he can devote to this expense, he can find a housing situation that makes sense given his lifestyle preferences and available funds. A financial advisor can also offer invaluable help in deciding how much to spend and whether downsizing to a condo is a good choice in the long run.