The thought is to downsize at the peak, wait and bank until the next down cycle then buy another property at a discount. Obviously the timing is a total unknown...
This sounds comparable to timing the stock market.
How are you able to determine the real estate peaks and bottoms? What sources are you using?
If these sources are so accurate, then why isn't everyone buying low and selling high?
As another poster said, what is the issue with SELLING THREE HOUSES at the supposed peak and buying one?
You have to live somewhere. You can't sell at the peak and "wait until the next down cycle" to buy something else, unless you plan to rent during the interim.
Besides, you have a family of 5.
How much is it worth to provide your family with a stable, comfortable, familiar environment to live and grow up in?
Selling a house, moving all of your belongings into a 2 BR condo, then selling and moving again and again with real estate cycles, doesn't sound worthwhile to me.