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.
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I think this article misses one of the big downsides to downsizing in California (where this article is focused): property tax. In California, property tax is basically based on purchase price. This means even if an owner can make a healthy profit moving to a smaller home, that profit might be gone in 10 years due to the increased property taxes. Even if seniors are interested in downsizing, it might be financially detrimental to do so, and they stay in place, which constrains the supply of “family homes”, making them more expensive and basically adds to the housing crisis.
I mean, I kinda get it. If a boomer just dies, and their kids inherit the house, the kids pay 0 in taxes if they sell it. Not saying that it’s right, but say they want to move their 1.5 million dollar house and downsize to a million dollar house. Then they have to pay a couple hundred grand in capital gains tax which is a wash. They get a smaller house, and their kids get a smaller inheritance. If they gave the larger house to their kids, the kids could sell it at market price and pocket the entire amount tax free.
Whatever. They just don’t want to pay anything. Probably bitch about the real estate agent fees, too. They’re only trapped by their own greed.
The entire argument comes down to “oh, those poor people, they have to pay their fair share of taxes on the huge amount of equity they’ve just earned”. Seriously, the bias is disgusting.
Equity isn’t money in your pocket, though, and just because the house is suddenly worth $1.5 million on paper doesn’t mean they have extra money to pay their tax bill.
I know lots of people are bitter about the housing market but I don’t think it’s the fault of people who bought a home and just want to live in it. The people (or corporations) who buy homes as investment properties or to flip them are probably more worthy of anger.
Don’t have the money to pay the tax bill? Show me that math.
You buy a house for 300k, sell for 700k, you made 500k, that’s 15% tax filed jointly on long-term property. But wait! There’s more! You get to exclude the first 250k if it’s your primary residence! So you’re paying 15% on 250k. $37,500. Which is substantially less than income taxes.
They just sold the house and (assuming it was paid off) have 700k (less realtors fees, etc.) and absolutely could pay the tax. Even if it wasn’t paid off, the capital gains would be reduced and they would owe less money. We’ve moved and sold 2 homes in the last 20 years, made capital gains on each sale, and paid the appropriate taxes because we aren’t idiots and didn’t piss the money away.
So tell me again how they don’t have the “extra money to pay their tax bill”?
They took the worse couple in the article. They have the house since the 90s. They will pocket a big fat check, and they are angry that they have to pay taxes on that.
Cry me a river.
The article is explicitly about capital gains. It’s not like they have to pay the tax before they sell it. Use the proceeds from selling to pay the tax. That’s the whole point.
I think you just argued against home ownership. The point in the equity is that it has a sustained value but is also non-fungible. The moment they sell the house, they will have all that cash to pay that tax bill. If they turn that equity into new equity (i.e sell one house and buy another) then they won’t pay a single cent unless their earnings are greater than $500,000.
Also the people in the article DO NOT WANT TO LIVE THERE ANYMORE but will not sell to a family who does want to live there because they don’t want to pay a little bit of taxes. And people wonder why everyone hates Boomers.
When they sell the asset, they need to pay the tax. Conveniently, at that point the sale provides the money from such the taxes should be paid.
This is nonsense. The tax-free allowance is massive and they’re only required to pay tax on all the free money, nothing they actually earned.
If there was 100% capital gains tax on all domestic property, we wouldn’t have all that free money pushing up the cost of housing for everyone.
Most homeowners don’t have to pay capital gains on their home when they sell. Thanks to tax legislation from the ’90s, a gain of up to $250,000 for a single tax filer or $500,000 for a couple filing jointly is exempt from tax. That’s providing the sale is of the homeowner’s primary residence and that they meet other requirements such as living in the property for two of the past five years.
So assuming their house is worth $1M, they get $500k tax free and pay 14% on the remaining $500k, or $70k which comes out to 7% of the sale price. $930,000 doesn’t seem like too bad of a haul.
I could be wrong, but “capital gains” to me means only on the increase in value. So if they bought the house for $200k, they would be paying tax only on the $300k.
Not massive enough for how US home prices have ballooned. Even from 2016-2023, it looks like housing in El Cerrito have almost doubled from $750,000 to $1.1 million. If they bought 40 years ago, the gains would be even larger. FRED says housing prices nationally have 3x’d since 1970, which doesn’t even account for localized price growth.
It is very easy to have a capital gain above $500k these days.
Definition of tax: https://www.nerdwallet.com/article/taxes/selling-home-capital-gains-tax
It’s free money.
Otherwise known as: boomers wanting to downsize are making a whole bunch of cash with which to do it and are finally paying a fair portion of their net worth.
Awwwe, are these people crying in realized gains? Boo fucking hoo.
Most homeowners don’t have to pay capital gains on their home when they sell. Thanks to tax legislation from the ’90s, a gain of up to $250,000 for a single tax filer or $500,000 for a couple filing jointly is exempt from tax. That’s providing the sale is of the homeowner’s primary residence and that they meet other requirements such as living in the property for two of the past five years.
That means if a couple bought a median priced home in 1987 for $100,000 and they’ve lived there as their primary residence and are selling it today for $550,000, the $450,000 gain from that investment is not taxed because it falls under the $500,000 exclusion to capital gains taxes.
However, if those same $100,000 homebuyers lived for 37 years in an area that has seen enormous growth in home values — as is the case for many parts of California — and their home now sells for $2 million dollars, that’s nearly $1.9 million in profit, of which only $500,000 is excluded from taxes.
Oh, how horrible. /s
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:
A homeowner who keeps all the profit of a home that sells for $500,000, for example, may find that a condo in their same area, where they can age in place, is $450,000. After calculating realtor fees and closing costs, the profit hardly covers the new purchase, let alone provides any extra income for retirement.
This is the real reason they are not moving. They would be stepping backwards financially instead of stepping forward.
That’s a fictional scenario, though. Why would an entire house be selling for the same price as a tiny condo with HOA fees? These people have a huge house worth millions of dollars, so I’m confused why they would use a $500k sale price in their hypothetical scenario.
Sure those are made up numbers but they illustrate a real issue. Where i live, and I’m sure other high cost of living areas, it’s the land that’s expensive, in short supply. The actual house might be a much smaller part of that.
What that turns into is prices may be insane, but a house isn’t much more than a condo isn’t much more than a vacant lot. Then when you buy, taxes are reset to the new value, so property taxes will now be much higher and realtors commission will be insane. So they need to take a mortgage and take a cost of living hit on the taxes, then are clobbered by high interest. They may literally not be able to afford to downsize
Their home is worth 2mil. They absolutely would not be stepping backward.
It’s a ridiculous scenario considering the real value of their home. They might as well have invented a scenario where these people only get $100k for their 3000sqft, 5 bedroom home and then have to pay $2M for a one bedroom condo on the bad side of town.
… 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.
What? They would have a much bigger property tax bill
If their smaller new house is worth less than their original the property tax bill will be less. This is one of the incentives to downsizing.
That’s not how property taxes work in California. They’re likely paying way less than they would be if they bought a new house, even if it was smaller
Aww, poor them. They only had enough left over to pay fully for their next place and pocket $50k.
There is little incentive to downsize.
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.
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.
think the capital gains tax exception
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.
You can actually deduct the cost of any improvements you’ve made to the home. You can’t do much about inflation costs, but are you really arguing that it’s bad to only receive 85% of free money rather than 0% by not selling?
Except you aren’t just selling. You also have to buy. And if from the tax and high housing prices it’s a wash to downsize, there’s not nearly the incentive to.
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.
Feels like the crux of this whole thing is that housing shouldn’t be an investment.
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.
Everytime people talk about “the market” i realize its become a religion. The market doesnt magically do shit. The market doesnt just happen. We can make the market do any damn thing we choose because the market is actually…people.
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
Public housing would be a step in the right direction
We’ve had that in the US and they’re referred to as “the projects.”
What’s your point?
How could it be changed so it wouldn’t be?
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:
Interesting. So there’s 2 main reasons and 1 knock-on effect on why Tokyo (not Japan, just Tokyo) has affordable housing.
- They build a LOT of housing. Tons of dense housing which most other countries don’t match.
- 55% inheritance tax, no exemption. Meaning generational accrual of wealth from houses can’t happen.
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.
It could be changed to penalize or disincentivize people from owning multiple homes through taxes. Like maybe tax the shit out of anyone that owns more than two in order to allow the middle class the chance to purchase a rental property but stop the ultra wealthy from from buying up entire neighborhoods.
Good luck changing that. Housing has been a promised vehicle for wealth growth to multiple generations.
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.
Isn’t this where the boomers use a 1031 exchange and convert the large home into a smaller luxury condo for themselves and a few lower income units to rent out to struggling Millenials?
Haha, I mean I get it… Giving away money to uncle sam sucks but I agree with your sentiment. They are coming out ahead, that house was an investment that is paying dividends. I am hoping to have that problem some day!
Contributing financially to the democratic society in which you spent the entire time of gaining monetary value able to vote which enabled the increase in value of your property? That’s the thing here, this isn’t throwing money away, and it isn’t imposed without your say. Taxes aren’t fun, and we don’t always like where they go, but as adults we should be able to respect them. They’re part of how our society functions and a necessary component of many nice things we need in order to prosper.
This long time anti tax attitude in this country is part of what destroyed our infrastructure, ruined our regulatory bodies, and contributed to our massive wealth gap.
To be fair, it wasn’t the attitude that destroyed the infrastructure. Despite people’s attitude toward taxes, they still paid. The problem is precisely that they don’t like where that money is going. In most cases, their taxes are just funding a trust fund baby’s extra paycheck while they sit in office and neglect their duties while discussing divisive politics to distract from the fact that they are robbing the American people. A lot of people aren’t against the idea of paying taxes, but rather America’s inability to appropriately spend money on the common good.
That attitude that the majority of taxes go to paying politicians is part of the issue. Yeah politicians suck and many are overpaid. The military is too. You me and everyone else knows these will be cut after infrastructure and welfare. Fighting for tax cuts then becomes “I don’t want to pay for infrastructure or welfare”. And seriously look at anti tax sentiments, they’re often anti welfare or anti government assistance.
On the other hand; would you personally make that choice if you were in their situation? I am willing to bet you, nor any other reader, would not. While that doesn’t excuse the greed aspect of it; it does cast at least some light upon why they are refusing to sell and take a loss on it.
If you only paid $100,000 and you made $1,000,000; you’d have $900,000 profit; of which you’d probably only see ~60% to ~40% of, if Capital Gains taxes are anything near what I think they are. If we assume a “worst case”, where the Federal Government takes 40% and the State takes about 20% more, that means your tidy profit is only about $390,000. That means you’ve probably got to secure another $140,000 in financing on average to pick up a more modest $500,000 home (in today’s market) to retire in.
But villainizing the boomers isn’t going to solve the housing crisis easier either. We legitimately need more homes. We. Need. Them. Yesterday. So maybe the policy needs to lean towards bigger developments that cost less. We did it during WW2; where massive amounts of homes were built cheaply. We probably need to achieve that again, and do better than we did during a war that was diverting supplies away from the effort.
How do we achieve that? I don’t know.
If you only paid $100,000 and you made $1,000,000; you’d have $900,000 profit; of which you’d probably only see ~60% to ~40% of, if Capital Gains taxes are anything near what I think they are. If we assume a “worst case”, where the Federal Government takes 40% and the State takes about 20% more, that means your tidy profit is only about $390,000. That means you’ve probably got to secure another $140,000 in financing on average to pick up a more modest $500,000 home (in today’s market) to retire in.
Capital gains taxes range from 0-20% Federally, depending on your income. In Cali, the addition is up to 13%
Which means that worst case scenario, you sell a property in Cali, you would pay 33% of the profiit above the original price of the house and the 500,000 exemption. So on a house you bought for 100,000 and sold for 1,000,000, you’d pay the awful, awful price of… 133,000, leaving you with a paltry $867,000.
Ah; but did you forget you pay income tax on top of capital gains taxes?
Lol holy shit I can’t believe u said something this fucking stupid…hahaha
Have you tried learning how something works before forming an opinion on it?
You literally don’t for long-term capital gains.
nor does the capital gains affect your ‘regular’ tax bracket.
capital gains tax rates are a lot lower than that. https://en.wikipedia.org/wiki/Capital_gains_tax#United_States
these people are mostly greedy fucks that don’t want to pay their very reasonable share of taxes on their investment return.
I forgot about all the people howling and foaming at the mouth about the “death tax”. Boomers gonna boomer I guess.
Rent it, buy a new house, die, and the tax threshold on estates is $2 million.
They were empty nesters 10 and 20 years ago too most likely. They got greedy and now they don’t want to pay tax on the absurd increase in value of their house?
Cry me a river. The only feelings this should spark in anybody reading it is anger and hatred. Greedy, repulsive people.
It’s fine to be frustrated with the housing market but it seems like you’re directing that frustration at these people as if they’re responsible for it and that’s not really the case. You’re making a lot of assumptions about their motivations that don’t seem fair to me. Get angry at real estate investors, lobbyists, and politicians, not two random people trying to sell their house.
I appreciate the “all sides of the conversation” approach, but their gripe is with having to pay taxes on completely bonkers returns. That’s not a surprise for anyone.
That’s not what the article says.
Sure, they’d make a lot of money selling their house. But if it’s your only residence, you can’t just sell your house unless you’re willing to move away from your home, potentially any remaining family, etc. Places a lot of people have lived for generations.
Because you have to buy another home. And the article states that mortgage rates are ridiculous, house prices are very high for all homes, they simply can’t find smaller homes in a lot of cases because builders are primary building huge houses, and the capital gains tax is impacting single-family houses in a way it wasn’t designed for. They are essentially trying to downsize and coming out worse or the same as if they stayed in too large of a house.
This is bad for everyone: people can’t downsize, people who want/need larger homes can’t find any on the market, builders continue to think big houses are what people want and keep only building them, people can’t move into/out of neighborhoods causing them to stagnate, etc.
Do the math dip shit. They sell this house for 2 million and ur claiming they can’t build whatever they want in some small town for 250k-500k?
Holy fuck ppl in this thread are simply brain dead.
Read the article dip shit.
You vastly misunderstood what I was talking about. They are greedy. They want to realize those gains and not pay taxes. Greed. This has nothing to do with anything else. They were happy to see the value go up as high as possible until they realized they need to pay their fair share. I’m angry at them for being greedy.
_ directing that frustration at these people as if they’re responsible for it_
Yeah… their voting policies over the years, they are.
Not every person over 50 is a republican.
Theyre crying about paying taxes on free money they didnt earn through work or effort. Taxes are the price we pay to live in a society. Im not sympathetic to people not wanting to pay their fair share to live in a community. Reminds me of children bitching about having to eat broccoli.
The reason they’ve earned some frustration is not because they bought a house in SoCal the 90s. The reason they’ve earned some frustration is because after living in a house in SoCal for 33 years and raising four children in it, they felt like they wouldn’t earn “enough” money from reselling it. This feeling of entitlement was so strong that they complained to an international news corporation about it.
Even if they didn’t create the unjust system, they clearly benefit from it and will do whatever it takes to get what they consider to be their piece of the pie. They want the real estate system to work as designed-- because how else would they get their money?
The thing that really gets me is that one of them is a retired teacher. He dedicated his life to helping young people. He’s got to be educated enough to do some self-reflection. But this mindset that he has about real estate and profit is destroying the world for the same exact people he’s worked so hard to help.
The house is worth 2mil.
I’m not sure what point you’re trying to make, and I also checked the article and couldn’t find a source for that number
My point is millionaires should STFU and stop whining. Obv u disagree.
They got greedy by living in a house. Right .
Nope. They got greedy by staying in that house for as long as possible to maximize their gains, and by then bitching about taxes.
Try harder next time.
Aww these poor Boomers just made too much money on their homes and now they have to pay some taxes if they want to sell for huge profits. Boo fucking hoo.
And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.
Is this accurate? I’m having a hard time believing it, but if it is true, then they need all cash to buy a smaller home. Downsizing shouldn’t be a money-losing proposition, otherwise there would be 0 interest in doing it.
The argument is that these people will sell their really large house then pay the same amount they earn on a smaller condo. This is going to be very much context dependent and frankly I don’t buy this as a problem for most people.
While also taking away starter homes.
What the fuck am I supposed to live in?
I’m sick and fucking tired of moving from rented basement, to rented attic, to basement, to garage… Etc… every 2 goddamn years I have to move. I’m almost 40, never going to be married, and stuck renting absolute overpriced shit. I’m so over it.
Not that I don’t emphasize with your struggle - I just want to point out that there are people stuck in those “starter homes” with 5 or more kids who could really benefit from a 5 bedroom upgrade because they’re at a point in their lives where they can afford it and they need it. The housing crisis we’re living through produces victims up and down the income ladder.
Also this whole problem can be traced back to our absurd zoning laws blanketing most of California and the US. Still the boomers’ fault, but not for decisions they’re making today. Most of them are screwed right along with the rest of us. :(
Maybe they should just move to a lower cost of living area, away from where they’ve lived their whole life? You know, like they’ve been telling their kids and grandkids they need to do to make ends meet.
Most homeowners don’t have to pay capital gains on their home when they sell. Thanks to tax legislation from the ’90s, a gain of up to $250,000 for a single tax filer or $500,000 for a couple filing jointly is exempt from tax. That’s providing the sale is of the homeowner’s primary residence and that they meet other requirements such as living in the property for two of the past five years.
That means if a couple bought a median priced home in 1987 for $100,000 and they’ve lived there as their primary residence and are selling it today for $550,000, the $450,000 gain from that investment is not taxed because it falls under the $500,000 exclusion to capital gains taxes.
However, if those same $100,000 homebuyers lived for 37 years in an area that has seen enormous growth in home values — as is the case for many parts of California — and their home now sells for $2 million dollars, that’s nearly $1.9 million in profit, of which only $500,000 is excluded from taxes.
A normal.person would still be ecstatic…
Not to mention that the capital gains tax ranges from 10%-20% depending on income, so of the $1.4 million in taxable gains they’re only paying $140,00-$280,000 dollars, meaning after they sell the house they still get $1.7 million profit.
Yep, and both over 70, so it’s not like they’re paying a lot in taxes.
They’re just greedy boomers that don’t want to pay taxes, nothing new or surprising
But they contributed everything and the public services that their taxes fund contributed nothing whatsoever, ever, never, not once. How dare communism reach into their pockets at their old age. They’re just trying to do the right thing, don’t you know?
Yeah. I’m not hating on these people, but they would have $1.4 million in taxable income, and 37% would be owed as taxes, leading them around 900k. If they planned it over a few years they could actually avoid some of that.
So I don’t know their situation, but walking away with $882k doesn’t leave you without options.
Edit: I forgot that you only pay the normal income rate on assets held for a short period, so they would have $1,620,000 after taxes.
The issue is with the tax and high costs of homes, they break even or worse when downsizing. They aren’t realizing that profit from selling because they are trying to buy another, smaller house.
If their new house is less than a million, they’re fine…
Very few people “downsize” to a million dollar property.
Hell, they get $500k before any tax
Guess they are using the alternate definition of trapped. They of course could rent the house and use the rent money to rent/buy thier new place and probably have a little profit at the same time.
Ah yes, more landlords, that’s what society really needs!
They’re happy to say that younger folks should be okay with it, but as soon as they’re faced with it, it’s suddenly a tragedy?
Horse shit. Fuck anyone gaslighting the value of housing security. I hope their home value turns to dust.
They are suggesting that they rent out the empty rooms.
The only thing that really changes is issues are more likely to be dealt with quickly since they might affect the landlord as much as the tenant.
If you can’t afford to sell your house lease it out and start transferring the equity to your kids as fast as you can without taking too big a hit on inheritance tax. Use the income to buy a smaller house in a less posh neighborhood.
And thus the cycle of nobody buying homes to live in continues.
This is part of a growing class of “house rich, cash poor” people.
They can’t afford to move because the sale price of their existing (oversized) houses would not be enough to buy existing stock of smaller houses, in spite of the crazy market. The old houses they live in are increasingly in exurbs or even age-restricted communities that the kind of new family that might need a house that size can’t be in for totally different reasons.
Plus they might want to stay in that community. Maybe that’s where their friends or family are. Their doctors. All that kind of stuff. And it’s not unreasonable for a person to want to keep living where they have a social network.
They also can’t rent out rooms or ADUs because local zoning laws arbitrarily forbid it either directly or by enforcing things like minimum parking requirements that are not achievable. Which would be one great way to increase housing supply and let people stay where they are; turn extra space into more housing. But these boomer houses tend to be in the most restrictive type of suburbs that stifle the rights of the homeowners and prevents sustainable growth.
They increasingly don’t have pensions because those disappeared in their lifetimes. Retirements funds got fucked by a variety of financial catastrophes in the intervening years, so they’re increasingly relying on social security checks to pay for their (mandatory) car, big ass house expenses, and all that stuff. They’re living well above their means and even if they realize it and want to make a change, the actual ability to do so is a massive problem.
The net result of this situation is even more tightness in the housing market. Even less real stock, since the ability to downsize is so lousy.
This thread has a sure lot of angry people and boomer hate in it. Which I get, but this is all part of the same housing problem with the same solutions – more low-cost/smaller homes need to be built and fewer restrictive codes/zoning rules preventing common-sense housing. A lot of people want to develop the properties that people want to buy, but city policies are often the biggest obstacle to them – that and lack of financial products to fund development thanks to the gradual snuffing out of local banks.
Imagine becoming a millionaire for no other reason that you occupied a dwelling for a couple decades then bitching about having to pay taxes when you cash out your new unearned fortune. Now framing the fact that youre a millionaire as being victimized. Its just selfish. Be a grown up and pay your taxes like all the other adults.
Why’d you put this in reply to my comment?
Because im one of the “angry people hating on boomers”
Huh? Did you only read that single sentence from the entire thing I wrote? I posted explaining my take on what the problem being described in this article really is. Then how this situation doesn’t just affect the older, house-rich folks, but how it goes on to hurt all of us. And moreover how the fixes for the general problems in housing policy to help everyone get into more affordable homes would also help these same people.
… and your takeaway from what I wrote is that I’m white knighting for boomers?
That’s very frustrating for me.
Thank you!!!
Selfish boomers with a 2million dollar house don’t get to complain about taxes and get pity.
They’re going to have to get a roommate, and lay off the Starbucks and avocado toast.
Oh, no, boomers have to pay taxes on the MASSIVE gains on their cheaply purchased houses now worth millions. Cry me a river.
They already get to exclude $250,000 of increase (or $500,000 if married filing jointly). So a married couple selling a house they bought for $50k and sold for $550,000 pays no taxes at all!
So boomers need to shut the hell up.
So if you are ok leaving this tax law in the 90s let’s leave minimum wage there too. Can’t have it one way, all pay and taxes should be changed as decades move on. You will be in the same predicament 30 years from now.
So if you are ok leaving this tax law in the 90s let’s leave minimum wage there too.
Federal Minimum wage even today ($7.25) means living $81 above the poverty line of $14,891.
Example of a home seller in the article they are walking away with $1.55m after all taxes paid.
These are not the same.
Can’t have it one way
And why not?
all pay and taxes should be changed as decades move on.
I do agree with this statement. Corporations are taxed way too low, and those at the bottom of the income ladder are subject to the highest taxation relative to their assets needed for basic living.
You will be in the same predicament 30 years from now.
$1.55m in my pocket after all taxes paid from selling a home would be a wonderful predicament to be in.
Prop 13 made it so their taxes did not change as the decades moved on. Their property was taxed much closer to that $100k value they bought their house than the current ~$2 million it is worth. They should have been paying about $19k each year in property taxes. Instead they were paying less than 1/10th that.
A half million in tax free capital gains isn’t enough for you? It was already too high in the 90s.
Minimum wage is an absolute measure: a fixed amount not pegged to inflation. Taxes are a percentage, a relative value that adapts to inflation.
I’m all for a relative measure for the minimum wage.
Also, in this scenario the people would be left with $1,620,000 after selling their house, which hardly leaves them without options. I get that they want to stay in that same neighborhood. But the problem they are facing is an enviable one for many less fortunate people.
Someone needs to go take a few tax and accounting classes.
Are you making a mental note to remind yourself to sign up for classes later?
No. What he was failing to understand was that a number of people wind up in a situation where going from the bigger home to the smaller home (after it’s all said said and done) they just barely break even. If they are only going to break even then why down size? Where’s the benefit? Who would say “hey I have an idea, let’s sell this big house, buy that smaller house, and not have extra cash after it’s done “. No one is taking that deal.
