It’s fascinating to observe all the market forces that influence people’s decisions to buy and sell homes outside of what drives them to move for personal reasons.
We’ve been talking for months to a couple who wishes to move out of their condo and into a single family home. When they sell the condo, if they file taxes jointly, they are eligible for a 500k exclusion on the gain from the sale. They’re planning to get married but they’re not legally married yet. Their marriage needs to be recognized by the state to file taxes jointly. Their question is if they want to be legally married before and aside from their wedding celebration with family and friends, or if they want to make their marriage legal and celebrate at the very same time. Until they sell, they can’t purchase. It doesn’t make sense for them to sell until they can get their 500k exclusion. They can’t get their 500k exclusion until they’re married. They may not want to be legally married until they have the wedding celebration of their dreams. So many pieces need to fall into place for the house pieces to happen!
We’ve been in touch for some time with a couple who was thinking of separating and selling their home. When they went through the economic consequences of their separation plan in detail, and they faced all the costs and taxes before their 50% split of their assets, and then they computed the joint costs of running two households instead of one, they decided to work harder to reconcile because it was so much more prudent for their family financially.
We’re in touch with so many people who really want to move, but they don’t want to contribute so much of their equity to the government in capital gains taxes on the sale of their home. And so they stay put and wait until those taxes go away when someone dies and the house is inherited after death at fair market value and a sale at that point means no capital gains taxes. The benefit of the choice goes to the survivor, who saves the capital gains taxes. The sacrifice of the choice goes to the person who dies without moving.
Right now, interest rates rose to the highest they’ve been since 2007. 80% of Americans are said to have refinanced when interest rates were at their historic lowest rates last year in 2021. When we call sellers who have really wanted to move for some time, they’re contemplating if it makes sense for them to give up their low interest rate on their current house in order to move and borrow money at a higher interest rate on the purchase of a new house where they’d really prefer to live if the economics supported it. The choice is real.
I went on a listing appointment last week with a homeowner who plans to sell his house in Hancock Park because he’s getting married and moving into his new wife’s house in another area; he can afford to do what it takes to make his dreams come true. We sold a house last year in Covid and our sellers are in escrow buying a house now with a loan they plan to refinance as soon as interest rates go back down, deciding that floating for some time at the higher interest rate is worth it to live the life they want to live until rates go lower again. We have another seller buying and selling at the same time, appropriately figuring that doing simultaneous transactions in the same market makes sense, especially given the acceptable interest rate they scored from Citibank. At the many open houses we’re holding, we’re seeing a large percentage of the buyer pool speaking of buying in cash and not getting a loan right now at all; today more than ever cash is king.
The profession of being a real estate agent at its best has always been about smart problem solving, effectively navigating change, and most of all strategically figuring out the economics of maximizing the biggest investment most of our clients will ever make in their lifetime. Now, more than ever before in history, the job of a real estate professional is crucial. The most rewarding part of our job is achieving a great result no matter the hurdles to overcome along the way. Interest rates are higher than they’ve been in years and that does present a formidable hurdle for many buyers and sellers today. We’re prepared and energized to navigate this new climate expertly and with care! We got this!
Wishing those who observe an easy and meaningful fast on Yom Kippur this week!