Older Owners Are Projected to Free Up 13.9 Million Homes. What It Means for Downsizers

On Oct. 5, 2026, Realtor.com projected that baby boomers and the Silent Generation will release 13.9 million owner-occupied homes between 2026 and 2036, a sharply faster handoff than in the past decade. For anyone weighing a smaller home, it means more older owners selling into the same market, and a reason to check the data first: the share of sellers who move mainly because their home is too large has barely changed, and the money side often hinges on equity and the mortgage, not on a much smaller house.

Key takeaways

The Realtor.com figure counts homes left through death and moves to care too, so it measures generational turnover, not voluntary downsizing.
In four National Association of Realtors (NAR) surveys taken between mid-2017 and mid-2024, 8% to 11% of sellers said their main reason was a home that was too large; moving closer to friends or family rose from 14% to 23%.
Among sellers aged 60 to 78 who bought again, the median home bought was only 100 square feet smaller than the median home sold, according to NAR's 2025 generational report.
Married couples can exclude up to $500,000 of gain on a main home ($250,000 for single filers) if they meet the two-out-of-five-year tests; bills to raise the limits remain in committee.
In the illustrative example below, $900 of a $1,454 monthly saving comes from no longer paying a mortgage; a $450 condo fee cuts the running-cost saving from $1,004 to $554.

What it means for you

Empty nesters and retirees: expect to trade upkeep more than square footage; compare running costs line by line.
Owners with a low-rate mortgage: the gap between a locked rate and the 7.40% average of Oct. 8, 2026, is what keeps many owners in place; buying outright with sale proceeds, where the equity covers the price, avoids a new loan.
Renters moving to a smaller unit: the home-sale tax rules do not apply, but the cost comparison does, and so do the federal mover-estimate rules on an interstate move.
People moving closer to family: the most common reason older sellers give; California and Florida tax transfers work only within each state.
Downsizing to cut living costs: check HOA fees and their history first.
Adult children helping parents: the FAQ covers the two-year window for a surviving spouse and the rule for time spent in a care facility.

Is downsizing really increasing?

Partly. Older owners are a larger share of sellers, but evidence that more people choose a smaller home is thin. Baby boomers were 55% of sellers in NAR's 2026 Home Buyers and Sellers Generational Trends report, released April 15, 2026, up from 53% a year earlier. NAR's 2025 Profile of Home Buyers and Sellers put the typical seller's age at 64, the highest on record, with a record 11 years in the home before selling.

The reasons sellers give have shifted less. In NAR's generational reports, "home is too large" has stayed in a narrow band:

NAR report (transactions covered)	Home is too large	Closer to friends or family	Retirement
2019 (July 2017–June 2018)	10%	14%	7%
2021 (12 months to July 2020)	9%	15%	7%
2023 (July 2021–June 2022)	8%	21%	11%
2025 (July 2023–June 2024)	11%	23%	7%

Shares are of sellers who also bought a home, one primary reason each. The 2026 release names downsizing among boomers' reasons without percentages.

Why many owners stay put

The first force is the rate gap. A Federal Housing Finance Agency staff working paper (24-03) found that each percentage point by which market rates exceed a borrower's existing rate lowers the probability of a sale by 18.1%, and estimated that this lock-in prevented about 1.33 million sales from the second quarter of 2022 through the end of 2023. At the 7.40% 30-year rate in Freddie Mac's survey of Oct. 8, 2026, a new $200,000 loan costs about $1,385 a month in principal and interest, against about $843 at 3%.

The second is that many older owners have no loan to lose: Redfin's April 2026 analysis of Census data found that 57.8% of baby boomer homeowners have no mortgage. In an Ipsos survey for Redfin in May 2025, 33.5% of boomer homeowners said they would never sell; the most common reason was liking their home (55%), and only 8% cited a low mortgage rate. In AARP's 2024 Home and Community Preferences survey, 75% of adults 50 and older wanted to stay in their current homes, though 44% expected to relocate, with housing costs a primary motivator.

What the 13.9 million figure measures

The Realtor.com analysis by economist Jiayi Xu defines a "release" as the net number of homes vacated by older owner-occupants through death, a move to institutional care, household consolidation or a move to a rental. Because the count is net, an older owner who sells and buys a smaller home does not add to it. It projects 13.9 million releases from 2026 to 2036, about 1.39 million a year, which is 74% more than the roughly 8 million these two generations released in the prior decade. Only 0.38 million are homes with two bedrooms or fewer. A 2018 Fannie Mae paper projected 13.1 million to 14.6 million older-owner exits for the same decade. Neither counts downsizers specifically.

What downsizers keep finding out

The move is usually about place

In NAR's 2025 generational report, moving closer to friends or family led among sellers aged 60 to 69, 70 to 78 and 79 to 99 (27%, 36% and 34%). "Home is too large" was second among sellers 70 and older (16% and 18%) but fourth among those 60 to 69 (12%), behind retirement (15%) and a less desirable neighborhood (13%). Among sellers 79 and older, 12% cited upkeep made too hard by health or finances.

The new home is rarely much smaller

In the same report, the median home sold and bought went from 2,100 to 2,000 square feet for sellers aged 60 to 69, sellers 70 to 78 from 2,000 to 1,900, and sellers 79 to 99 from 2,100 to 1,800. These figures cover only sellers who bought another home, not those who moved to a rental or care. For most of them, "downsizing" meant a new location, layout or upkeep load more than less floor area.

Running costs shift rather than vanish

AARP's Sept. 28, 2026, report on whether now is a bad time to downsize quoted Rachael DeCosta, a wealth adviser with Sax Wealth Advisors in Bethesda, Maryland:

"A lot of people don't downsize to save money."

In the same report she described a client whose condo fee rose from $735 a month in 2006 to nearly $2,000. Association fees can rise and special assessments add one-time charges, so the fee history and reserve budget belong in any comparison.

Taxes and property tax transfers

This section is general educational information, not tax or financial advice; a tax professional can apply these rules to a specific sale.

The federal home-sale exclusion

Under IRS Publication 523, a seller can exclude up to $250,000 of gain on a main home ($500,000 for married couples filing jointly) if it was owned and lived in for at least 24 months of the five years before the sale, and no other home-sale exclusion was used in the prior two years. For the $500,000 limit, only one spouse must meet the ownership test, but each must meet the use test, and neither may have excluded gain on another home in the prior two years. A partial exclusion may apply when the main reason for selling early is a job change, health or an unforeseeable event. Gain equal to depreciation claimed for business or rental use of the home cannot be excluded, and periods after 2008 when the home was not a main residence can reduce the exclusion. Gain above the limit is taxed at long-term rates of 0%, 15% or 20% (IRS Topic 409). That taxable part can also count toward the 3.8% net investment income tax when modified adjusted gross income exceeds $200,000 for single filers or $250,000 for joint filers (IRS Topic 559).

The limits are unchanged for 2026 sales. The bipartisan More Homes on the Market Act would raise them to $500,000 and $1 million and index them for inflation; the House bill, H.R. 1340, and the Senate version, S. 3332, were both still in committee as of Oct. 11, 2026. The No Tax on Home Sales Act, H.R. 4327, which would remove the dollar caps, had not advanced beyond introduction.

California: Proposition 19

Since April 1, 2021, California homeowners who are 55 or older, severely disabled or disaster victims can move their property tax base value to a replacement main home anywhere in the state, up to three times, according to the State Board of Equalization. The original home must have been eligible for the homeowners' or disabled veterans' exemption, meaning it was the owner's principal residence, and the replacement must become the owner's primary residence. The replacement must be bought within two years before or after the sale; if it is bought first, tax is owed on its full value until the sale, with no refund.

If the replacement costs more than the sold home (100% of its value if bought before the sale, 105% within one year after, 110% within two years), the excess is added. In the board's example, a $400,000 home with a $100,000 base value and a $600,000 replacement bought in year one gives a taxable value of $280,000 ($100,000 plus the $180,000 above $420,000). Owners 55 and older file Form BOE-19-B (disabled owners and disaster victims use other forms) with the assessor in the replacement home's county, within three years of buying it.

Florida: Save Our Homes portability

Florida homestead owners can carry their accumulated assessment benefit to a new Florida homestead if they establish it within three years of January 1 of the year they left the old one, filing Form DR-501T by March 1, per the state's PT-112 guide. Under section 193.155(8), Florida Statutes, a cheaper new home receives a proportional share, and the benefit is capped at $500,000. Illustrative example: an old home worth $600,000 assessed at $350,000, and a new home worth $400,000, gives a new assessed value of $400,000 ÷ $600,000 × $350,000 = about $233,333, roughly $166,667 below market value.

Florida's Amendment 3, on the Nov. 3, 2026, ballot and needing 60% approval, would raise the non-school homestead exemption to up to $150,000 in 2027 and $250,000 in 2028 for permanent residents as of Dec. 31, 2026; later arrivals would start at $50,000. The Volusia County Property Appraiser says it does not change portability.

A worked example in numbers

Illustrative example: a married couple in their mid-60s, filing jointly, sells a home they have lived in since 1998. All figures are round assumptions, not market data.

Amount realized = sale price − commissions − other selling costs
Gain            = amount realized − (purchase price + improvements)
Net cash        = amount realized − mortgage payoff

Sale price $650,000, minus commissions assumed at 5% ($32,500) and other selling costs of 1% ($6,500), gives $611,000. With a $250,000 basis ($200,000 purchase plus $50,000 of improvements), the gain is $361,000, under the $500,000 joint limit, so no federal tax is due. Repaying a $40,000 mortgage leaves $571,000; an $8,000 move and a $380,000 condo bought in cash with $5,000 of closing costs leave $178,000.

For an owner who has always filed single, with the same figures, $111,000 would be taxable: up to about $16,650 if all of it falls in the 15% band, before state tax and any 3.8% net investment income tax. A widowed owner is a different case. Under Publication 523, the late spouse's share of a jointly owned home takes a new basis equal to its market value at the date of death, and in community property states the whole home generally does. If the home had been worth $600,000 at the death, the basis would be $125,000 + $300,000 = $425,000 and the gain $186,000, under even the $250,000 single limit.

Monthly cost	Current house	Condo
Mortgage payment	$900	$0
Property tax	$650	$400
HOA fee	$0	$450
Insurance	$250	$60
Utilities	$400	$220
Maintenance (1% or 0.5% of value a year)	$542	$158
Total	$2,742	$1,288

The gap is $1,454 a month. But $900 of it is the mortgage, which ends because the proceeds repay the loan, not because the home is smaller; the running-cost saving is $554 a month. If the condo fee rose by $200, that saving would fall to $354.

Selling and moving costs

Each percentage point of commission on a $650,000 sale is $6,500. Commissions are negotiable and not set by law; since Aug. 17, 2024, buyers working with an agent sign a written buyer agreement before touring homes. Redfin reported the average buyer's agent commission at 2.42% in the third quarter of 2025; it does not report listing-agent rates. Interstate movers working from a non-binding estimate are bound by delivery rules in 49 CFR 375.407, covered in the FAQ.

Frequently asked questions

Must the sale be reported if all of the gain is excluded?

Sometimes. IRS Topic 701 says a seller who receives Form 1099-S, the real estate proceeds form, must report the sale even if the gain is excludable. Any taxable gain must also be reported.

Does time in a nursing home count toward the two-year use test?

It can. Publication 523 counts time in a care facility licensed for the owner's condition toward the use test if the owner became physically or mentally unable to self-care and lived in the home for at least 12 months of the five years before the sale.

Does a widowed owner keep the $500,000 limit?

For a limited time. A surviving spouse can use the $500,000 limit if the home is sold within two years of the death, the survivor has not remarried and other Publication 523 conditions are met. After that, the $250,000 limit applies.

Can I buy in California before selling and still use Prop 19?

Yes, if the purchase is within two years before the sale; the value test is then 100% of the old home's market value. Until the old home sells, the replacement is taxed on its full value, and that extra tax is not refunded. The claim is filed after both transactions close and the owner has moved in.

Can an interstate mover hold my belongings for extra charges?

Only within limits. Under 49 CFR 375.407, which covers interstate household moves, on a collect-on-delivery shipment with a non-binding estimate the mover must deliver once an individual shipper pays up to 110% of the estimate plus services added later; extra "impracticable operation" charges due at delivery are capped at 15% of other charges, and the rest is billed afterward.

Before you list: a checklist

Price the new area, not just the smaller home.
Gather the purchase closing statement and improvement receipts to establish your basis, and check the two-out-of-five-year tests.
Ask your county assessor or property appraiser about base-value transfer or portability before you buy.
Request the HOA's fee history, reserve study and any planned special assessments.
Get written commission quotes and written mover estimates, noting which are binding.
Rebuild the monthly cost table above with your own figures, with and without your current mortgage payment.