Another article showing concern in the housing market- yet the author may have lacked critical thinking

[BMWTurboDzl]

I may be off base but believe any appreciation on your primary home, if lived in for 2 of the past 5 years, is tax free? Are there localities that don't treat it this way?

It's capped as @SC Maintenance mentioned. So imagine living in California for 40 yrs where you have $1M in equity and no mortgage. You should move but you're going to pay tax on part of the proceeds from sale. The tax acts as a deterrent.

The exemption covers the first $250k for single and $500k for married

 

[KrisZ]

The exemption covers the first $250k for single and $500k for married

If you have two wives it jumps to $750k

 

[SC Maintenance]

It's capped as @SC Maintenance mentioned. So imagine living in California for 40 yrs where you have $1M in equity and no mortgage. You should move but you're going to pay tax on part of the proceeds from sale. The tax acts as a deterrent.

The exemption covers the first $250k for single and $500k for married

I doubt its the primary reason, even if there is capital gains.

Why would old people move if there happy where they are and can manage there place? If they have a $2M house, its unlikely they need the money anyway. In most states the tax basis is likely still low. So a few rooms collect dust.

Moving costs a lot. Sell one house, buy another - there is 12% in realtors off the top. Yes "selller pays" on the buy, but its built into the price - no free lunch. Then how many inspections, deed transfers, lawyers. Sell 1 house, buy another same price - 20+% of that transaction goes into the total costs. Yes, born by 2 parties, but you still in the end have the same two assets, they just changed hands.

 

[KrisZ]

I doubt its the primary reason, even if there is capital gains.

Why would old people move if there happy where they are and can manage there place? If they have a $2M house, its unlikely they need the money anyway. In most states the tax basis is likely still low. So a few rooms collect dust.

Moving costs a lot. Sell one house, buy another - there is 12% in realtors off the top. Yes "selller pays" on the buy, but its built into the price - no free lunch. Then how many inspections, deed transfers, lawyers. Sell 1 house, buy another same price - 20+% of that transaction goes into the total costs. Yes, born by 2 parties, but you still in the end have the same two assets, they just changed hands.

No, he means California is full of people that bought their houses 20-30 years ago that are worth 1-2 million now.
But because of CAs prop whatever, they pay property taxes based on the purchase price and not the current market value. That’s how these people can afford living there, but cannot really afford to sell and move out because of the taxes they would have to pay on the profit.

 

[SC Maintenance]

No, he means California is full of people that bought their houses 20-30 years ago that are worth 1-2 million now.
But because of CAs prop whatever, they pay property taxes based on the purchase price and not the current market value. That’s how these people can afford living there, but cannot really afford to sell and move out because of the taxes they would have to pay on the profit.

That makes sense - same here, if I moved my property taxes would be close to double and I have only owned this one for 10 years - the basis can only increase 3% a year.

However he said capital gains, which is tax on the sale.

In reality you have both. And in the event you still have a mortgage and refinanced at <3%, then you have 3 reasons. Hence the reason no one is moving unless they have to.

 

[BMWTurboDzl]

I doubt its the primary reason, even if there is capital gains.

Why would old people move if there happy where they are and can manage there place? If they have a $2M house, its unlikely they need the money anyway. In most states the tax basis is likely still low. So a few rooms collect dust.

Moving costs a lot. Sell one house, buy another - there is 12% in realtors off the top. Yes "selller pays" on the buy, but its built into the price - no free lunch. Then how many inspections, deed transfers, lawyers. Sell 1 house, buy another same price - 20+% of that transaction goes into the total costs. Yes, born by 2 parties, but you still in the end have the same two assets, they just changed hands.

Sure not a primary reason not to move but everyone is different. If they're happy then ya why would they want to move but sometimes they're not happy and would like to move. What I didn't mention is that another deterrent which is specific to California is Prop 13. That's possibly a bigger deterrent because anyone who downsizes and chooses to remain in California runs the risk of paying the same or higher property taxes compared to the home they had been living in for the past 30 years.

 

[BMWTurboDzl]

If you have two wives it jumps to $750k

Well you can't have two primary residences so...

 

[SC Maintenance]

Sure not a primary reason not to move but everyone is different. If they're happy then ya why would they want to move but sometimes they're not happy and would like to move. What I didn't mention is that another deterrent which is specific to California is Prop 13. That's possibly a bigger deterrent because anyone who downsizes and chooses to remain in California runs the risk of paying the same or higher property taxes compared to the home they had been living in for the past 30 years.

Yes, I would agree property tax increase would be a bigger deterrent - because its forever where cap gains is one time.

South Carolina is similar. They can raise my tax value 15% max once ever 5 years - so it only compounds every 5 years. So mine will go up next year - its 10 years in June so they can raise it next cycle. Mine will go up 15% again I am sure, but I will still be paying maybe half of what someone buying here today would pay. It does of course change every year based on the millage, etc - but the assessment value is fixed per the limits above.

This is going to become an issue for local governments as people choose to stay in their homes for longer for all these reasons - tax revenue won't grow with inflation even.

 

[zzyzzx]

Housing Market Update: Supply Climbs 5%, Biggest Increase in Nearly a Year

The supply of homes for sale is picking up in time for spring homebuying season, and improving inventory is attracting some buyers.

www.redfin.com

 

[zzyzzx]

 

[zzyzzx]

Mortgage rates to stay above 6% through 2025, Fannie Mae says

Fannie Mae now says mortgage rates will stay above 6% through 2025, after predicting last month that the average 30-year fixed mortgage would drop below 6% by the end of this year.

www.foxbusiness.com

 

[zzyzzx]

Amid Weak Demand for Existing Homes, Active Listings & Price Reductions Jump, Listing Prices Weaken | Wolf Street

 

[alarmguy]

Mortgage rates to stay above 6% through 2025, Fannie Mae says

Fannie Mae now says mortgage rates will stay above 6% through 2025, after predicting last month that the average 30-year fixed mortgage would drop below 6% by the end of this year.

www.foxbusiness.com

Makes sense to me, slightly below historical average at 6%

 

[zzyzzx]

 

[zzyzzx]