A sale sign in front of a house under construction on a waterway plot on the coast of the Gulf Coast of Alabama, USA, on Friday, December 6th, 2024.
Mika Green | Bloomberg | Getty Images
Real estate experts are putting emphasis on the potential end of the capital gains tax on home sales, as President Donald Trump is floating this week, and whether it will help unlock the housing market.
The capital gains tax has not changed in about 30 years, but the National Association of Realtors is pushing it. They calculate that 15% of current homeowners will suffer taxes if sold in today’s market.
“Their accountants should not sell their homes for taxes,” NAR chief economist Lawrence Yun told reporters in a call Wednesday. “Of course, if the exemption is lifted, we’ll potentially see a significant portion of those lists.”
Yoon wants to reduce the number of retirees, but not because of the resulting capital gains tax. Currently, individuals are valued for profits of over $250,000 and couples over $500,000.
Most of those hits with taxes must be at the high end of the market. According to NAR, the median price of the home sold in June was $435,300. The share of homes sold over $750,000 in the month was 17%.
This tax applies only to the differences between what the home buyer bought the house and what they sold, deducting certain improvements.
Since the start of the pandemic, home prices have risen dramatically, up around 52% nationwide over the past five years. Despite that sharp rise, those at the bottom of the market do not exceed current exemptions.
The tax is for high-end homeowners and baby boomers who have owned their homes for decades and are now considering shrinking.
“Frankly, that’s not really important to the housing market,” Stephen Kim, a housing analyst at Evercore ISI, told CNBC’s “Closing Bell Overtime” on Tuesday.
“What really matters is a recovery of confidence. I believe that many of the actions taken by the Trump administration have created instability and uncertainty, and that those who make the biggest purchase of their life don’t want to be worried or uncertainty,” he said.
Redfin’s chief economist Daryl Fairweather suggested that reducing taxes will allow homeowners to actually keep their homeowners in their homes for a long time, as some sell to reach tax-affected levels of profit.
“It’s not clear to me that this will help the housing market. If there is, I hope to reduce taxes on home improvements, as if they’re putting in ADUs. That’s what will increase the value of your home.”
