Are you frozen in place? Boomers have a housing problem, too much house, that is. Less people are moving that have been in their home for decades.
Why is that?
There are two prevailing ideas as to why:
- It is cheaper to stay in their home than it is to downsize and move. Most often, 55+ communities in our area have higher tax bills because they were built within the last 20 years as well as a HOA fee making it cheaper for a boomer to remain in their home. The other option would be to downsize to a ranch home which some people do. However, many ranch homes were built in the 50’s and 60’s and need updating. Who wants to do that work? You might as well stay where you are.
- Capital gains exclusions haven’t changed since 1997, but home prices have risen around 182% in the same time period.
Moody’s economists say even though most boomers want to downsize, they won’t sell because of the tax bill.Take the hypothetical example of a widow with a 2,800-square-foot home, the authors write: she faces capital gains of $750,000, and after her $250,000 exclusion, she would pay taxes of more than $100,000 at combined federal and state rates. That represents over 20% of her downsizing proceeds.“The disincentive to sell is strong,” they write, and she would naturally favor the alternative of living in the house until she dies. “Her heirs would inherit the home on a stepped-up cost basis, avoiding the capital gains tax altogether.”
So why Sell?
If you are thinking about selling despite these two reasons and would like a free in home consultation on how to get your home ready for the market when the time is right, Call me at 267-397-6291.