By Hank Russell
Couples who have lived in the same house for decades might start thinking about downsizing. The kids are all grown up and got places of their own, so there is no need to hold onto such a large house, they say. But for those living in New York who are looking to downsize to a smaller home, they may want to rethink that strategy.
According to a recent report from MovingPlace, New York is the second-worst state to downsize, next to California. New Yorkers who relocate to a smaller place will lose $83,447 as a result of the move; that is the amount of money the homebuyers would still owe on the new house after downsizing.
The Golden State had the largest deficit among all 50 states at $91,446. The District of Columbia had a loss of $159,587, the largest overall. The report also found that two-thirds of the states — thirty-three of them — and the District of Columbia had those who downsized with negative cash flow.
Family homes cost a median of $401,520 in 2026, according to MovingPlace, while 2-bedroom homes command $333,451, a compressed gap that, combined with mortgage repayments and transaction costs, results in a shortfall.
The Midwest and Southwest states, however, saw those entering new homes with positive cash flow. Based on data from MovingPlace, Kansas had the highest net surplus with $45,410, followed by Oklahoma ($34,160), Missouri ($22,458), Texas ($19,515) and Indiana ($17,678).
In the top 10 places where downsizers would still owe money on their new home, two were in Long Island. Those in Uniondale would be $449,808 in the red, MovingPlace said. Despite its modest profile, the report noted, its location in one of the most competitive housing markets has driven smaller home prices well above larger ones: family homes today cost a median of $640,308, yet 2-bedroom homes have surged to $868,684.
Those in Manhasset would be on the hook for $445,497 after moving in, according to MovingPlace. The Nassau County hamlet is “known for its top-ranked schools and long history as one of the most desirable addresses in the New York metro area,” the report stated. Data showed that family homes rose from $1,087,895 in 2014 to $1,923,159 today. Two-bedroom homes have climbed to $1,568,438.
To find out where downsizing pays off — and where it doesn’t — MovingPlace modeled a realistic downsizing scenario for a typical American at the state and city level. In this model, the homeowner buys a family home in 2014 using a typical down payment and mortgage rate for that time. They make 12 years of mortgage payments, the average length of time Americans stay in a home before selling. In 2026, they sell the family home at its current market value. They use the proceeds to buy a two-bedroom home outright. Downsizers may experience larger of smaller equity gains if they move to a different city or state, the report said.
“Homeowners often assume downsizing will automatically free up a significant amount of cash, but the reality is far more nuanced,” said the report’s senior editor, Daniel Cobb. “What we’re seeing is a shift in how different types of homes are valued, particularly in cities where smaller properties are in high demand, whether from first-time buyers, downsizers, or investors. In those markets, the price gap between larger family homes and smaller properties has narrowed considerably, and in some cases, even flipped.”
“That means downsizing isn’t always the straightforward financial win people expect,” Cobb continued. “In high-growth areas, it can still unlock lots of cash, but in others, homeowners may find the financial benefit is limited, or that they’re actually losing money by moving. This could mean some homeowners may feel stuck in their current situations, either prompting them to move further away or abandon downsizing altogether.”