After 33 years and four children, Baby Boomers Marta and Octavian Dragos say they feel trapped in what was once their dream home in El Cerrito, California.
Both over 70, the Dragos are empty nesters, and like many of their generation, they’re trying to figure out how to downsize from their 3,000-square-foot, five-bedroom home.
“We are here in a huge house with no family nearby, trying to make a wise decision, both financially and for our well-being,” said Dragos, a retired teacher.
But selling and downsizing isn’t easy, appealing or even financially advantageous for many homeowners like the Dragos family.
Many Boomers whose homes have surged in value now face massive capital gains tax bills when they sell. This is a kind of tax on the profit you make when selling an investment or an asset, like a home, that has increased in value.
Plus, smaller homes or apartments in the neighborhoods they’ve come to love are rare. And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.
If it was just a problem of paying more taxes then the argument would be bullshit. The main problem is buried at the end of the article:
This is the real reason they are not moving. They would be stepping backwards financially instead of stepping forward.
Feels like the crux of this whole thing is that housing shouldn’t be an investment.
Good luck changing that. Housing has been a promised vehicle for wealth growth to multiple generations.
How could it be changed so it wouldn’t be?
Land is mostly a set resource with new developments and cities slowing. Home development follows land and while there’s been a boom, overall it’s been slowing. As there are more people, demand for housing increases.
All of this drives cost of homes up. So the longer you are in a home, the more it and/or the land it worth. Usually outpacing inflation. So when you sell, it’s worth more. It’s an investment by default even for those people who own 1 normal-sized single family home. It was an investment even when housing prices were reasonable decades ago.
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A-fucking-men.
“The market” sets wages. My ass, the market is Billybob greedy asshat saying “I won’t pay more than this.” Then Timmyjoe fuckwit says “well the market has spoken, it would be stupid of me to pay more when Billybob is only paying x”
And for you theorists out there “supply of labor will affect wages” let me introduce you to the new excuse: “No OnE wAnTs To WoRk AnYmOrE!” Can’t hire at the shit wage that’s out there? Just complain no one wants to work!
This comment is essentially commodity fetishism ELI5’d and I love it
https://en.m.wikipedia.org/wiki/Reification_(Marxism)
I watched a video a while back that talks about how in Tokyo housing is seen as more of a consumer good than an investment, and explains why:
https://www.youtube.com/watch?v=d6ATBK3A_BY
Interesting. So there’s 2 main reasons and 1 knock-on effect on why Tokyo (not Japan, just Tokyo) has affordable housing.
The first one is achievable nearly everywhere and would be quite popular. Except with those who already own homes. Building high-density housing will lower housing prices for those nearby. The video covers this well.
The second isn’t going to work in the US. Homes are the #1 generational wealth is accrued and how people rise in economic standing. From paycheck-dependent to stable, etc. Trying to take that away without some other way to build wealth and especially without a national retirement system is going to be deeply unpopular.
Another aspect I found very interesting: Tokyo demolishes and rebuilds every house on average every 30 years. That’s wild to me. They build for safety but not longevity. No one wants a pre-owned house. Couple this with the inheritance tax and I imagine most older people will just sell their homes or pass down only a small amount. Japan’s Public Pension System makes this feasible as well and without that I can’t see this becoming viable in America.
I also wonder how wasteful that kind of demolition ends up being.
Extremely wasteful - and that’s to say nothing of the obvious climate impacts from said waste. It’s one hell of a drawback to what I would otherwise describe as a system that works pretty well.
Public housing would be a step in the right direction
Or build more apartments maybe? The entire housing crisis in the US could be easily solved by adding sufficient apartments in the right places.
… What’s the issue?
They paid for the next place, including fees, and still have $50k in their pocket? How greedy does someone need to be, exactly, before we consider the behavior repugnant?
The issue is that they sold a large home and bought a small home and had very little money left over. It doesn’t make financial political sense to do that. They might as well stay where they are. There is little incentive to downsize.
Part of the solution to the housing crisis is solving that incentive problem.
The have their new property paid for and also have a much smaller property tax bill and lower maintenance costs. There’s still plenty of incentive to downsize.
Paying taxes on profit might hurt a little, but it’s a good problem to have.
Aww, poor them. They only had enough left over to pay fully for their next place and pocket $50k.
As long as you ignore property taxes and maintenance costs. Which normal people don’t ignore.
Maintenance costs are probably fairly minimal given how little wear and tear happens in an empty nest. And property taxes for elderly folks are usually frozen or nearly frozen in place - meaning the next buyer will be paying a much higher tax on the same house because they won’t qualify for those exemptions.
It seems like you don’t own a home, so I’m not sure there’s much point in continuing this conversation.
To the contrary - I own a large home in an urban area and it is filled with my children. But we don’t have to have a conversation - I was only pointing out the flaws in your logic. My tax bill will be $12k this year while my elderly next door neighbor’s will be a fraction of that. Our homes are identical (3k sqft over 3 floors). She’s not leaving because it would make little financial sense to do so. This is quite common.
Sounds like one of those people that doesn’t take a raise because it’ll put them in a new tax bracket. People that don’t know how the adult world works.
I think the issue is that with mortgage prices and the incredible costs of homes in California, capital gains tax comes into play for them when the vast majority of homeowners never even consider it.
So you have people with a large single family home wanting to sell and move into a small single family home (1-2bed) or even a condo and they end up with no benefit from doing so and potentially even an expensive mortgage. Essentially they are selling an Escalade to get a Civic and breaking even, which seems odd.
I think the capital gains tax exception should be expanded to be waived for single family homes under XXXX sq ft, with the above stipulations (living in the home continuously). It’s not these people’s fault their neighborhood shot up in price outpacing regulations meant to protect normal home owners.
Their only real out in this situation is to move away from where they’ve lived their whole lives.
Waive tax for primary residence, tax the everliving fuck out of non-primary residences to the point nobody wants to rent them out anymore.
Nope. No exceptions. You made money for doing no work, you pay taxes on that money. Plain and simple. Cap Gains tax rates are already absurdly low, so frankly anybody asking for a further reduced rate or exception is already a greedy pig not worth listening to.
I see you’ve never sold a house. If you do, have fun losing 15% of that value. The only way to prevent that is for your house to not accrue any value while you lived in it.
Cry to someone that gives a shit. Be less greedy. I’ve paid my share of capital gains, you don’t see me crying like a greedy little piggy about it.
It’s too bad no one agrees with you and you’ll die mad about it.
Seems like plenty people agree taxes should be paid. In fact so many people agree that it’s a law. Your greed will never fill that void, btw.
Condos generally aren’t much cheaper than houses. They would have the same issue if their region’s real estate was half as expensive. They would have had this problem 10, 20, 30 years ago if they were retiring. If you sell a house in an expensive area and want money left over, you either have to choose a shittier house/apartment to live, or a cheaper area.
Their home is worth 2mil. They absolutely would not be stepping backward.