Article on housing - appreciation & capital gains tax avoidance means less homes for sale (San Francisco: real estate, home sales)

[Chuck5000]

Great article. For many with huge equity gains in Bay Area real estate, their unwillingness to sell and pay capital gains is a factor in why supply is low.

Where capital gains tax slows home sales and drives up prices - San Francisco Chronicle

[BayAreaHillbilly]

Originally Posted by Chuck5000

Great article. For many with huge equity gains in Bay Area real estate, their unwillingness to sell and pay capital gains is a factor in why supply is low.

Where capital gains tax slows home sales and drives up prices - San Francisco Chronicle

This is no doubt a consideration for financially savvy owners who want to stay tax advantaged.

One other thing though, is, where is the seller going to move to?

The one in the story already relo'd.

But some really have a challenge. They could relo to a shoebox here in the Bay Area, and bank the difference, or, relo to someplace they'd hate.

Now our plan is to go somewhere many here probably would hate.

[Ruth4Truth]

Originally Posted by Chuck5000

Great article. For many with huge equity gains in Bay Area real estate, their unwillingness to sell and pay capital gains is a factor in why supply is low.

Where capital gains tax slows home sales and drives up prices - San Francisco Chronicle

Not if they roll the money over into a new house of comparable cost or close to it. Every situation is different. Are there really that many people with huge capital gains in property who are looking to downsize, enough of a population bubble to make a significant difference in the market? At least as many if not more would be upsizing.

[JohnS_15]

Originally Posted by Ruth4Truth

Not if they roll the money over into a new house of comparable cost or close to it. Every situation is different. Are there really that many people with huge capital gains in property who are looking to downsize, enough of a population bubble to make a significant difference in the market? At least as many if not more would be upsizing.

I have no evidence to back this up but the neighborhoods I've lived in both Oakland and SF and even now in Sac -- many of the homeowners of single family homes have been older folks who have lived there for ages. The neighborhoods have been turning over slowly to younger families, but I do imagine that there are many home owners in a position to downsize. Now whether the capital gains tax issue is the thing stopping them...I don't know. It also seems like these days - fewer people do the upsizing thing - especially in the bay area. Again just observational.

[Ruth4Truth]

Originally Posted by JohnS_15

I have no evidence to back this up but the neighborhoods I've lived in both Oakland and SF and even now in Sac -- many of the homeowners of single family homes have been older folks who have lived there for ages. The neighborhoods have been turning over slowly to younger families, but I do imagine that there are many home owners in a position to downsize. Now whether the capital gains tax issue is the thing stopping them...I don't know. It also seems like these days - fewer people do the upsizing thing - especially in the bay area. Again just observational.

So it's possible that there's a Boomer phenom (and/or their parents) who would want to sell to be able to move into a nursing home, or who are empty nesters and want a smaller place, but they feel trapped, due to the high cap gains? It's possible. Is there a greater tendency in the Bay Area to add onto a starter home, rather than move up? If so, all those factors could come together to tie up the market, you're right.

[Fiona8484]

Originally Posted by Chuck5000

Great article. For many with huge equity gains in Bay Area real estate, their unwillingness to sell and pay capital gains is a factor in why supply is low.

Where capital gains tax slows home sales and drives up prices - San Francisco Chronicle

Thanks for sharing, this was certainly an interesting read.

[bigboibob]

A big factor in encouraging homeowners to continue holding appreciated properties is the property tax is capped at 1% of the home's purchase price +inflation because of prop 13.

https://ballotpedia.org/California_Proposition_13_(1978)

[Ultrarunner]

Predictable Property Taxes allow long range planning.

It's not that taxes can't go up... it's that Prop 13 requires voter approval to add assessments... 55% voter approval is required for school infrastructure measures... 2/3 voter approval for the rest.

Prop 13 is the Statewide rate fixed at 1% plus a max annual cap of 2% for inflation...

My Property tax is about 1.7% because the voters are very generous.

[Ultrarunner]

Originally Posted by Chuck5000

Great article. For many with huge equity gains in Bay Area real estate, their unwillingness to sell and pay capital gains is a factor in why supply is low.

Where capital gains tax slows home sales and drives up prices - San Francisco Chronicle

it's one way of looking at it... remember that Prop 13 applies statewide of which the SF Bay Area is just one little corner.

A person of retirement age can sell and downsize without losing any of the Prop 13 benefits... some counties even allow the benefit to transfer.

Then there is the one time 500k exclusion for retired couples looking to sell...

So here are several ways to dispose of property and retain Prop 13.

[NewbieHere]

Originally Posted by Ruth4Truth

Not if they roll the money over into a new house of comparable cost or close to it. Every situation is different. Are there really that many people with huge capital gains in property who are looking to downsize, enough of a population bubble to make a significant difference in the market? At least as many if not more would be upsizing.

I think you are confusing the old law, Bill Clinton signed a bill to allow $500k capital gain exclusion now if you live in the house for 2 years. The old law of roll the money over is no longer applicable.