Jan 29, 2026
If you bought a home in the early 1990s, you might recall a slower, simpler process. Listings lived in newspapers. Buyers showed up with handwritten notes. Mortgage rates were higher than they are now, if you can believe it. And bidding wars weren’t the norm.
Fast forward more than three decades, and retirees selling longtime homes are stepping into a market that looks little like the one they entered. Yes, many are sitting on substantial equity. But the housing market of 2026 is shaped by high borrowing costs, selective buyers and far more friction when it comes time to move.
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Let’s imagine Mac and Sue, both 67, who bought their suburban four-bedroom home in 1994 for $145,000. The house is paid off and could sell for roughly $525,000 today. In addition, they have about $1.3 million saved across their retirement accounts and both plan to retire and claim Social Security starting this year. Their goal is to downsize, and they have their eyes on a property near their adult children and grandchildren which is on the market for $425,000.
On paper, the plan looks straightforward. In reality, the market dynamics matter more than ever. So, what do Mac and Sue need to know before they begin?
Is the timing right?
Purchasing a home has changed dramatically since the couple bought their property. In the 1990s, sellers didn’t face today’s level of scrutiny. Buyers now arrive armed with price histories, neighborhood comps, inspection checklists and affordability calculators. That transparency has reshaped pricing power.
But here are some numbers that matter: According to Realtor.com’s 2026 housing forecast, mortgage rates are expected to drop compared to last year, averaging 6.3%, and home prices are projected to rise a modest 2.2% (1). Coming off a near 30-year low, existing-home sales are projected to rise just 1.7%, while for-sale inventory will continue to grow.
These figures signal a shift toward a more balanced market that slightly favors buyers.
For retirees who can buy their next place with cash, it might be a good idea to take advantage of a calm market. But for those who need financing, the expected drop in mortgage rates is minimal. Selling a paid-off home and taking on a new mortgage at 6% or higher can feel like stepping backward financially, even if the new home is smaller.
That’s why some retirees may choose to delay downsizing. Holding onto a paid-off home can provide stability, predictable costs and protection from rate volatility, particularly if the home still meets their lifestyle and mobility needs. If you’re not under pressure to downsize, you can also take any extra time you have to plan your move and do it under the best circumstances possible.
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Downsizing sounds simple, but there are costs
Downsizing is often framed as a way to lower expenses. And in some cases, it does exactly that. Smaller homes can mean less maintenance, lower utility bills and fewer surprise repairs.
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But the hidden costs catch many sellers off guard.
Selling a home typically comes with agent commissions, closing costs, repairs, staging and moving expenses. On the buying side, retirees may suddenly face homeowners association dues, and insurance costs can be sky-high in some areas. Property taxes also have to be taken into account.
Depending on the amount of possessions you own and the timing of closing dates, there may be additional expenses, including temporary housing and storage costs.
And of course, anyone selling their primary residence will also want to look up the IRS’s capital gains tax rules come tax season to see if they qualify for an exclusion, which can shield a large portion — but not necessarily all — of the profit from the sale.
Article sources
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Realtor.com (1)
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Chris Clark is a Kansas City–based freelance contributor for Moneywise, where he writes about the real financial choices facing everyday Americans—from saving for retirement to navigating housing and debt.
