Going Smaller to Save: Study Reveals Best Metros for Downsizing

According to a new report from StorageCafe, downsizing can be a smart investment for a variety of reasons, from wanting to reduce carbon footprints to seeking smaller bills and reducing time and effort spent on housing chores. But more than that, switching to a smaller home can give a big boost to your bank balance, allowing for various investments and travel or helping swell your retirement savings account.

There are many factors that might affect the proceeds resulting from downsizing, including the condition of the new home and how much improvement it needs, relocation costs, and the decision about whether to continue owning or to rent. There are also HOA fees if you’re switching to condo living, as well as any capital gains tax that might be incurred from the sale.

Key Findings:

• Homeowners across the country can save around $196K through downsizing from a 4-bedroom to a 2-bedroom home
• The San Jose metro area takes the first spot, ensuring downsizing savings of $778K, followed by San Francisco and Urban Honolulu
• The lowest amount of downsizing savings can be found in the Rochester metro area – roughly an eighth the amount that can be gained in San Jose

But essentially, how much homeowners can really save from downsizing depends on location, as it dictates much of a home’s value. To determine where people can save the most, we analyzed the country’s largest 100 metros, taking into account the price difference between a 4-bedroom home and a 2-bedroom one (a classic move for empty-nesters), property tax savings over a 10-year period, as well as selling and buying closing costs for both houses. According to our study, homeowners stand to potentially gain around $196K on average from downsizing across the US, with some huge differences when zooming in on specific locations.

Downsizing may in fact create an opportunity to find financial respite even in California’s red-hot residential market, with San Jose and San Francisco giving way to the biggest savings when embracing smaller living. Honolulu, Hawaii, joins the exclusive club of cities where downsizing results in savings north of $500K.

Californian gold rush: here's where you can cash in the most from downsizing in the Golden State

California makes it extremely profitable for homeowners to move to smaller residences, with six of the top 20 metros that offer big savings through downsizing being in the Golden State. Although the real estate market in California is starting to cool off, akin to the rest of the country, home prices remain high, which translates into impressive savings when trading a 4-bedroom for a 2-bedroom.

The San Jose-Sunnyvale-Santa Clara metro area ranks first nationally for downsizing savings – moving within the metro area from a 4-bedroom residence to a 2-bedroom home can amount to average savings of almost $778K.

Residents of San Jose itself who value big city life and the social interaction it entails can still pocket a tidy sum if they trade their 4-bedroom home for a 2-bedroom one in the city. Savings can reach $663K on average, giving San Joseans a welcome break from the high costs associated with living in the Capital of Silicon Valley.

Leaving the suburbs and heading to the city can give you even better chances of swelling your bank balance. Switching from a 4-bedroom home in Sunnyvale to a 2-bedroom in San Jose can result in savings of around $1.6 million.

The second-most profitable downsizing location in California, and across the nation, is the San Francisco-Oakland-Berkeley metro area. Much like San Jose, the Bay Area packs a serious punch when it comes to downsizing savings potential, with a move from a 4-bedroom home to a 2-bedroom residence generating savings of approx. $563K. Settling for less square footage in the city of San Francisco proper can save nearly $642K for those who don’t mind having less room.

Focusing in on popular relocation routes in the area, downsizing from San Francisco to Fremont – a good option for those in search of a slower pace of life – has the potential to save homebuyers an estimated $1.4 million.

Several Southern US metros, from Miami to Knoxville, have strong downsizing savings potential

The best-placed Southern metros in the ranking are in Florida: Miami-Fort Lauderdale-Pompano Beach on 7^th and North Port-Sarasota-Bradenton on 9^th places. For the Miami metro area, the overall downsizing savings homeowners can potentially pocket hover around $322K. Homeowners in the city of Miami proper can save about $218K by downsizing locally.

Downsizing between two specific cities of the metro area, on the other hand, can bring homeowners significantly more. Those willing to relocate from Fort Lauderdale to a smaller home in Miami can reap serious financial benefits: $570K. Downsizing from Fort Lauderdale to Hialeah results in even higher average savings of around $820K.

Dallas-Fort Worth-Arlington is the only Texan metro that makes it to top 20 nationally, with around $245K in potential downsizing savings. Those who don’t feel inclined to leave the city of Dallas proper stand to gain even more: approx. $360K if they swap a 4-bedroom home for a 2-bedroom one.

Two of the most popular moving routes within the metro area, Dallas to Arlington and Dallas to Fort Worth, are also very profitable for homeowners interested in relocating not only to a smaller city, but to a smaller home as well, with savings hovering just south of $420K.

To read the full report, including more data, charts and methodology, click here.