Posted by: Daryl & Wendy Ashby | April 23, 2010

Is Yours a Plus-Size?

Living in a plus-sized home is not all that it’s cracked up to be. Wendy and I can speak first-hand on the matter as 12 years ago we dumped our palatial home for a small but comfortable 1100 sq. ft. rancher.

To date we have had no regrets.

Bob Jackson really likes the home he carefully restored in one of our upscale neighborhoods. But now — as he searches for a new job to replace the one he lost, the  five bedrooms and 4,200 square feet strikes him as a luxury he can ill-afford.

His plan is to sell and move into a smaller home with much fewer costs. Cheaper utility bills. Lower property taxes. Little if no mortgage.

“I’d prefer to stay exactly as I am, but that’s not going to happen. And I accept that,” said Bob, now 60. “If I find a place with about 1,500 square feet, I’m ok with that.”

With a large portion of the population wandering aimlessly around their huge homes, the now empty-nestor and the retiring baby boomers generation; is representing a mass exodus of couples from the original family home, rendering it no longer a simple matter to sell a larger house.

The higher end of real estate market is seeing an unacceptable number of days on the market, and a lot of these houses that would previously sell for in excess of $700,000 are taking large hits on their price ranges, upwards to 20 to 25% in places.

For Bob, that has meant cutting the asking price of his home by more than $200,000. His 40-year-old carefully restored home, with three storeys, 41/2 bathrooms, two staircases and a suburban-sized yard, which he purchased 10 years ago, is a product of an era when Victoria’s middle-class elite spent lavishly.

But in the days of the housing market bubble, price wasn’t the only thing that became inflated; the typical new home was 11 per cent larger in 2007 than in 2000, and these McMansions abounded as though the race to beat the Jone’s knew no limit.

Now, with large mortgages harder to get, employment security questionable, it is causing many home owners to pinch their pennies and the trend is reversing. The median new house built last year was 2,219 square feet, a 2.5 per cent decrease from 2007 and the first year-over-year drop since 1995.

Twenty-two per cent of sellers were trading down in the 12-month stretch preceeding June 2009, and these were typically older Canadians making a lifestyle choice. But we are seeing both the want-to and have-to downsizing today.

The former are folks who have been in their houses for decades, who need to downsize for obvious reasons — there’s no kids, no spouse. Then there are the ones who feel they may have bit off more than they can chew, especially now with higher interest rates looming on the horizon.

Common sense dictates, tough economic times call for desperate measures.

Norm Watson of Victoria says that he is feeling the effects of the down market. He figures he can save $950 a month by switching to a 1,200-square-foot apartment, even though he expects the rental income from the  townhome he’s leaving won’t cover his mortgage. Watson is attached to his old place, with its bright colours, skylights and Jacuzzi tub, but he’s philosophical about the impending change.

“I don’t need a place that big when it’s just me, my girlfriend and two small dogs,” he said.

Bob feels the same way. His kids are now grown, and he knows his house was intended for a family. Because he does not have a large mortgage, he could use the sale proceeds to buy a smaller property outright and eliminate monthly payments altogether.

“When your income is significantly diminished, any level of debt is unacceptable,” he said.

Bob’s place has been on the market since early January with an asking price of $779,900, down from the estimated value of $995,000. Counting the money he put into it, that price would leave him with about $150,000 less than he spent.

The work he did during the refinishing of it was extensive, but Bob had expected to stay there until he retired. But considering how many people owe more on their mortgages than their properties are worth, he knows his situation could be worse.

And even in these days of national belt-tightening, he can say with confidence that 4,200 square feet is not too large for all buyers, it is just too big for him at this point in his life.

“What’s really funny is, some people have looked at the house and said, ‘It’s not big enough.”  Go figure eh.

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