‘We love our forest life’: I’m 62 and work full-time. I own a $600,000 California home perched on the edge of wilderness. Has the time finally come to downsize?

Dear MarketWatch,

I’m 62, and working full time making $60,000 a year. I have $31,000 in liquid assets and another $10,000 in a Roth IRA.

I owe about $200,000 on my home in Northern California, which worth $600,000. It will be more property and home than we can physically handle within the next six years.  

The mortgage is $1,500 a month. My husband is retired on Social Security, bringing in $1,200 a month. We have no other debt. Our living expenses are around $4,000 a month. 

We love our forest life, and the peace and quiet of living on the edge of the wilderness. I could be ready for a smaller home, but the cost in California is prohibitive even at that. Both adult kids live in the area. 

What should we do?

Ready for a Change 

The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at [email protected].

Dear Ready,

Let’s do the math to see if it makes sense to sell or stay put.

If you make $60,000 a year, your take-home in California is roughly $3,900 based on an ADP paycheck calculator. Your $4,000 monthly expenses eat up that amount, so you won’t have enough money to contribute towards your mortgage. That leaves your husband’s income of $1,500 going towards the mortgage payment or $1,200 a month. You also said you have no debts outstanding aside from the home loan. That probably gives you a small buffer. 

In six years, you may be retired, but if you keep the house, you would have made more than $85,000 in mortgage payments, leaving you with a smaller outstanding balance, and perhaps more in your portfolio of stocks and other assets. 

Does it make sense for you to downsize right now in anticipation of your smaller needs? No. Start your search now, by all means, but there is no real rush. See what neighborhoods you like in the area, and what you can afford. You may decide that your quality of life is better where you are, and you get more bang for your buck.

You will also need to factor in property taxes: You don’t want to pay more than what you are paying now, given your limited finances. Proposition 13 is a state constitutional amendment that limited increases to the property taxes on homes throughout the state. A property could only be reappraised for tax purposes when a change in ownership occurred, when new construction was completed or if the market value declined.

You could consider a condo, but it seems unlikely that that would fit into your lifestyle and your love of forest life. Moving into a busy area is a big change. If you moved to an apartment building, you would likely have to deal with many other noisy neighbors. 

A senior living community is another option. Take a tour, see if the amenities and features interest you. Again, it would be a big difference from living on the edge of wilderness, and once again you will have neighbors/cohabitants in close proximity.

Yes, home-price growth has slowed considerably in the San Francisco and the Bay Area, but they’re still expensive considering how high mortgage rates are today. And with rates remaining high, it’s possible that you may see further price drops. But market conditions remain volatile. 

If you do find that smaller home, you can take steps towards downsizing. For some older people, having all bedrooms on the ground floor is an important change, and anticipates their potential future needs. List all the considerations and wants you have from this new house. Then see what’s available on the market. 

Take your time. It’s a big process, especially with the low number of homes on the market right now. And if things change in the next six years, perhaps your children will want to buy your home, If something else transpires, like you suddenly find your dream home, you’ll have flexibility. 

You love your home. If you sell it, there will be no going back.

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