There are several topical issues that are on the current or near horizon for our local real estate markets.
First, and probably most talked about is the tax-change proposal at the time this article was written, had just moved through Congress and was headed for the President’s desk.
As an editorial article in a recent San Jose Business Journal correctly points out, “there are tens of thousands of house-rich owners … who would benefit tremendously from the proposed new provisions.”
On the supply side, the lack of inventory in Los Altos and surrounding communities, combined with the possible $500,000 tax-free profit proposed in the bill could help to increase inventory – especially for homeowners whose taxable profits are $500,000 or less.
There are, our clients tell us, a fairly large group of homeowners who were waiting to sell their homes until the proposed capital gain changes went into effect.
On the demand side, however, we may see many buyers with large stock holdings more willing to cash in their stocks to purchase homes given the strong stock market and the decrease in the capital gains taxes to 20 percent or less.
What many homeowners have not yet realized is that the bill wipes away the ability for one to “roll over” gains.
Where this could impact our market would be in the high-end homes in Los Altos and Los Altos Hills where homeowners fortunate to have purchased in the past decades have often times accumulated much more than $500,000 in gains and could stand to pay more taxes under the new provisions if they decided to trade down.
Also, if one were to have over $500,000 in gains and moving up, the inability to defer gains vis-a-vis a “roll up” could create a taxable situation; under current law, one can move up and defer paying taxes.
So where will our real estate market be in six months? Given the incredible communities in which we live, the top-notch schools, the climate, the world famous pet parade, etc., don’t bet on real estate prices falling too quickly in the near future.
Brett Thomas is the manager of Alain Pinel Realtors at 167 S. San Antonio Road, Los Altos.
