Why are there so few homes in any price range on the market?
People usually choose not to sell a home because they want to stay local because of a job, or because of family ties or health reasons. But most of all, people on a fixed income who have lived in their home for a long time are comfortable sitting with low property taxes and a low-payment mortgage, or possibly no mortgage payment at all. People say, "I couldn't afford to buy my own home at today's cost, and if I decide to move and come back, I won't be able to find a home or pay for one." Finally, capital gains taxes are a huge bite for people to face when selling.
How are things different today from 10 years ago, and how has that affected buying and selling?
Years ago, if you sold your primary residence, you could buy a more expensive home and defer capital gains tax. Today, if you sell your home and buy a more expensive home, you get hit two ways. First, you will probably have a huge capital gains tax, except for an exemption of $250,000 for singles and $500,000 for couples filing jointly. Also, your property tax will likely go up 1.25% of the purchase price (varies by state), even if the price you sell for is more than the home you purchase. Another big change in the high-end price ranges is the recent deduction cap of $10,000 for property taxes. This has demotivated trade-up purchasing in the luxury market, again keeping homes off the market of would-be trade-up sellers.
Do you see more homes coming on the market during summer or by next year?
I honestly don't see inventory opening up. Rents have gone sky-high, and many homeowners have opted to lease rather than sell. With more demand than ever to lease, and with purchases at a price point that few can afford, there are more renters in the renter's pool than ever. Job security is good, and salaries are high, allowing people to pay high rents, particularly in areas that are either close to work or in a good public school district. People will overpay to avoid long commutes and the cost of private school.
Wouldn't low interest rates create more buying and selling?
Theoretically, interest rates should stimulate buying and selling, but people are stuck, afraid to buy and concerned about the dramatic cost increase caused mainly by property taxes. As it stands in any area of the country experiencing a strong seller's market, the most common reasons a home becomes available for purchase are death, health, age, a move to assisted living or divorce. Occasionally, when relatives live out of state, a homeowner may opt to move out of state to a lower cost of living by paying all cash for a much less expensive home after selling and paying off their mortgage.
For more information, please call Ron Wynn at 310-963-9944, or email him at [email protected] To find out more about Ron and read his past columns, please visit the Creators Syndicate webpage at www.creators.com.
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