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Trading Down: Can It Still Bankroll Your Retirement? WSJ

People took an enormous amount of money out of their homes during the bubble—$358 billion in the peak year of 2005 alone, according to Goldman Sachs. So-called cash-out refinancings raised mortgage burdens sharply. That, combined with the price plunge, has wiped out trillions in home equity during the bust, making empty-nesters unable to trade down easily.

The Hornes of Holliston, Mass., sold this house for a smaller one nearby, but haven't enjoyed the windfall they expected.Trading down to a smaller home is a retirement-planning staple. According to an April study by the Society of Actuaries, 20% of not-yet retirees say they plan to downsize after the last child leaves the nest. But it is getting a lot harder to do, even for wealthier people. A study by the Joint Center for Housing Studies at Harvard University, scheduled to be released on Monday, shows that while mobility has slowed across all age groups during the real estate bust, "mobility rates among seniors have posted the sharpest drop." Trade-downs in March comprised about 8% of total home sales, down from 12% in October 2008, the first year for which there are historical comparisons, according to
the National Association of Realtors.
By M.P. McQueen, June 12, 2010

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