14 ms·

Fellow Northern California homeowner here. You can sell it and you will net a return. I'm not sure I understand your gripe. It sounds like you're annoyed about

by mbesto 9y ago

Fellow Northern California homeowner here. You can sell it and you will net a return. I'm not sure I understand your gripe. It sounds like you're annoyed about the hassle of moving , the associated fees, etc. But the parent's point is valid - the appreciation of value of your house is great for you. > 1. Capital gains tax Note - if it's your primary residence you get capital gains relief on the first $500k. > 2. Real estate agent fees If you're in the bay area, then you negotiate these down to the minimum (IIRC 2.5%) because the market is so liquid and the agents add very little value (if you're smart). Also, you can negotiate not to pay the commission if you're the buyer. So the only burden is on the sale, which is less impactful since you've already made a profit on it. > 3. Higher property taxes Yes, this is a bitch in CA...see next point. > we can't afford to move! Clarification - you can't afford to move in the general vicinity, but you could certainly move to Nevada (for example). If you are not viewing your house as an investment, then guess what? You get to live in an area that is high demand! Good for you for timing the market appropriately when you bought.

lisper 9y ago
> if it's your primary residence you get capital gains relief on the first $500k. Yes, I know. But our appreciation is substantially more than that. The higher it goes, the more expensive it becomes to make a move. > which is less impactful since you've already made a profit on it Only if we move to a less expensive area. If we make a local move, that "profit" just gets rolled in to the next house. There's no way to cash out without leaving the area. > Clarification - you can't afford to move in the general vicinity, but you could certainly move to Nevada (for example). Yes, exactly right. What we really want to do, but can't because it's too expensive, is downsize. This would not be the case if prices were stable.
- ttul 9y ago
  Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.
  - el_benhameen 9y ago
    You arguably have a point (so does the parent), but this isn’t the way to express it in a respectful discussion.
    - dalacv 9y ago
      But does ttul really get his point across at how he really feels without the colorful words?
      - grzm 9y ago
        Likely they could. "Colorful words" are often used to elicit an emotional response, and emotion can significantly impair one's ability to self-reflect and remove bias. If the goal is civil, substantive discourse (as is the goal of HN), all parties involved need to keep this in mind when commenting. That does take additional effort, but it's worth it to keep HN one of the better places to engage on the internet.
    - Danihan 9y ago
      I dislike the notion that discourse needs to be respectful at all times. Discourse shouldn't be baselessly disrespectful, sure. But the robotic, tsk tsk, shaming attitude that gets thrown around on forums whenever someone expresses any negative emotion gets old too. In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem.
      - chaostheory 9y ago
        Maybe if the comment added to the conversation somehow it'd be more tolerable. However, all the comment does is insult someone without adding anything interesting. It's a waste of space and time for everyone else reading it. It doesn't belong in HN.
        Danihan 9y ago
        Expressing incredulity and frustration at the obtuseness of someone's complaint doesn't seem especially useless to me. Why is expressing emotional reactions pointless, in your mind? Doing so gives everyone more information about the reactions they might expect to their concerns... it enforces social norms, etc.
- mbesto 9y ago
  But you don't realize a net loss from moving to a smaller home in the same area. The only hinderance is paying a higher tax % (because of CA), but you'll likely net more positive cash (because of the transaction) + the absolute value of your new taxes will be less. I'm still not sure why exactly the issue is. You literally can afford to downsize and you'll make a ton of money doing so. > If we make a local move, that "profit" just gets rolled in to the next house. Huh? That's not how it works... 2008 - Buy house for $1M 2017 - Sell house for $2M 2017 - Buy new house for $1M (but smaller size) Congrats you have an asset worth $1M you've just made $1M in cash. Now net out fees and you have a downsized home and are more liquid than you were before, but with slightly less wealth than you had yesterday (due to netting of fees associated with the transaction).
  - bzbarsky 9y ago
    > 2017 - Buy new house for $1M (but smaller size) Assuming there's anything on the market for $1M. The problems start when there isn't.
    - mbesto 9y ago
      But if you're downsizing then yes there is a cheaper house. That's how the housing market generally works ($ per square foot * # of square feet). > The problems start when there isn't. And the market always opens up when there isn't because it means the demand goes higher and thus creates new sellers. That also "rises the tide" and increase everyone in the area's house prices. So it nets it self out.
      - bzbarsky 9y ago
        > But if you're downsizing then yes there is a cheaper house. Sure. But it might be $1.6 million, not $1 million, in your example...
        mbesto 9y ago
        Ok, so what? It's still cheaper than $2M....so they can still afford it....
- ng12 9y ago
  I feel like you're really making your own problem here -- you want to downsize while keeping a large portion of your equity. The ratio of profit you make moving from a $2m house to a $1m house is the same as moving from a $200k house to a $100k house in a "stable" area.
  - lisper 9y ago
    This has nothing to do with equity (except insofar as equity is part of your net worth). This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. The higher prices go, the higher that cost goes. It's easiest to see that when considering a purely lateral move, but the cost of a move doesn't really depend on the cost of what you buy with the proceeds of the sale, it just makes the math easier if the prices are the same. We put a certain positive intrinsic value on a local move (and a very high negative intrinsic value on a remote move), because we like the area but the house we're in is not ideal. If the cost of a local move is less than this intrinsic value, we'll move, otherwise we won't. The higher prices go, the higher the actual cost of moving goes, and the less likely we are to move.
    - mbesto 9y ago
      > The higher prices go, the higher the actual cost of moving goes Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction. > This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. I think I finally understand your position now. The cost isn't prohibitive, it's the negative impact on your wealth. Which is true. The reason I and others are reacting strongly to your position is because your conflating transactional costs (expenses, fees, etc) with wealth (accumulation of assets). Two very different things that use a common medium to interact (i.e. currency). Here's the predicament. Your implying that you can transfer assets (wealth) without any transactional costs. This is just not how the market for any asset transfer works (stocks, cash, etc), because someone or some system has to be setup to broker the transaction. What your essentially complaining about is why you have to pay fees to complete an asset transfer. I know very few markets were transferring assets doesn't incur a fee. I don't know what to tell you other than this is basically economics 101. CA taxes on the other hand - that's something to complain about. CA taxes inadvertently nudge people to hold on to property longer, reducing supply and thus driving overall prices up.
- patrickg_zill 9y ago
  My understanding was that you can avoid all capital gains taxes via "1031 like kind exchange": you sell your house, buy one elsewhere for about the same amount, and pay no capital gains taxes?
  - secabeen 9y ago
    That only works for business property.
  - mercutio2 9y ago
    1031 is only for business property. Specifically doesn’t apply to primary residence. But CA Prop 60 allows Californians over 55 to downsize their house and maintain the same tax basis they had before the exchange, which very well might apply here, although IIRC it has weird county by county restrictions.
thescriptkiddie 9y ago
>> 3. Higher property taxes >Yes, this is a bitch in CA...see next point. Property taxes in CA are extremely low. https://en.wikipedia.org/wiki/California_Proposition_13_(1978) https://en.wikipedia.org/wiki/California_Proposition_13_(197...
- mbesto 9y ago
  That's not the parent's point. If I buy a $1M home in CA 10 years ago and I pay 1% in taxes then and the house is worth $2M 10 years later, I don't get charged 1% of $2M after 10 years. I get charged a marginal increase ever year and this increase isn't based on market norms (I forget what the actual # is, but it would be like paying 1% of $1.25M). This means, if I sell my $2M house after 10 years), and buy another $2M house next door, my taxes are way higher in my second home due to prop 13.
  - shostack 9y ago
    Depending on your age, you may be able to not get dinged with the new home's taxed value.[1] [1] http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm

by mbesto 9y ago

lisper 9y ago

> if it's your primary residence you get capital gains relief on the first $500k. Yes, I know. But our appreciation is substantially more than that. The higher it goes, the more expensive it becomes to make a move. > which is less impactful since you've already made a profit on it Only if we move to a less expensive area. If we make a local move, that "profit" just gets rolled in to the next house. There's no way to cash out without leaving the area. > Clarification - you can't afford to move in the general vicinity, but you could certainly move to Nevada (for example). Yes, exactly right. What we really want to do, but can't because it's too expensive, is downsize. This would not be the case if prices were stable.

ttul 9y ago
Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.
- el_benhameen 9y ago
  You arguably have a point (so does the parent), but this isn’t the way to express it in a respectful discussion.
  - dalacv 9y ago
    But does ttul really get his point across at how he really feels without the colorful words?
    - grzm 9y ago
      Likely they could. "Colorful words" are often used to elicit an emotional response, and emotion can significantly impair one's ability to self-reflect and remove bias. If the goal is civil, substantive discourse (as is the goal of HN), all parties involved need to keep this in mind when commenting. That does take additional effort, but it's worth it to keep HN one of the better places to engage on the internet.
  - Danihan 9y ago
    I dislike the notion that discourse needs to be respectful at all times. Discourse shouldn't be baselessly disrespectful, sure. But the robotic, tsk tsk, shaming attitude that gets thrown around on forums whenever someone expresses any negative emotion gets old too. In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem.
    - chaostheory 9y ago
      Maybe if the comment added to the conversation somehow it'd be more tolerable. However, all the comment does is insult someone without adding anything interesting. It's a waste of space and time for everyone else reading it. It doesn't belong in HN.
      - Danihan 9y ago
        Expressing incredulity and frustration at the obtuseness of someone's complaint doesn't seem especially useless to me. Why is expressing emotional reactions pointless, in your mind? Doing so gives everyone more information about the reactions they might expect to their concerns... it enforces social norms, etc.
mbesto 9y ago
But you don't realize a net loss from moving to a smaller home in the same area. The only hinderance is paying a higher tax % (because of CA), but you'll likely net more positive cash (because of the transaction) + the absolute value of your new taxes will be less. I'm still not sure why exactly the issue is. You literally can afford to downsize and you'll make a ton of money doing so. > If we make a local move, that "profit" just gets rolled in to the next house. Huh? That's not how it works... 2008 - Buy house for $1M 2017 - Sell house for $2M 2017 - Buy new house for $1M (but smaller size) Congrats you have an asset worth $1M you've just made $1M in cash. Now net out fees and you have a downsized home and are more liquid than you were before, but with slightly less wealth than you had yesterday (due to netting of fees associated with the transaction).
- bzbarsky 9y ago
  > 2017 - Buy new house for $1M (but smaller size) Assuming there's anything on the market for $1M. The problems start when there isn't.
  - mbesto 9y ago
    But if you're downsizing then yes there is a cheaper house. That's how the housing market generally works ($ per square foot * # of square feet). > The problems start when there isn't. And the market always opens up when there isn't because it means the demand goes higher and thus creates new sellers. That also "rises the tide" and increase everyone in the area's house prices. So it nets it self out.
    - bzbarsky 9y ago
      > But if you're downsizing then yes there is a cheaper house. Sure. But it might be $1.6 million, not $1 million, in your example...
      - mbesto 9y ago
        Ok, so what? It's still cheaper than $2M....so they can still afford it....
ng12 9y ago
I feel like you're really making your own problem here -- you want to downsize while keeping a large portion of your equity. The ratio of profit you make moving from a $2m house to a $1m house is the same as moving from a $200k house to a $100k house in a "stable" area.
- lisper 9y ago
  This has nothing to do with equity (except insofar as equity is part of your net worth). This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. The higher prices go, the higher that cost goes. It's easiest to see that when considering a purely lateral move, but the cost of a move doesn't really depend on the cost of what you buy with the proceeds of the sale, it just makes the math easier if the prices are the same. We put a certain positive intrinsic value on a local move (and a very high negative intrinsic value on a remote move), because we like the area but the house we're in is not ideal. If the cost of a local move is less than this intrinsic value, we'll move, otherwise we won't. The higher prices go, the higher the actual cost of moving goes, and the less likely we are to move.
  - mbesto 9y ago
    > The higher prices go, the higher the actual cost of moving goes Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction. > This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. I think I finally understand your position now. The cost isn't prohibitive, it's the negative impact on your wealth. Which is true. The reason I and others are reacting strongly to your position is because your conflating transactional costs (expenses, fees, etc) with wealth (accumulation of assets). Two very different things that use a common medium to interact (i.e. currency). Here's the predicament. Your implying that you can transfer assets (wealth) without any transactional costs. This is just not how the market for any asset transfer works (stocks, cash, etc), because someone or some system has to be setup to broker the transaction. What your essentially complaining about is why you have to pay fees to complete an asset transfer. I know very few markets were transferring assets doesn't incur a fee. I don't know what to tell you other than this is basically economics 101. CA taxes on the other hand - that's something to complain about. CA taxes inadvertently nudge people to hold on to property longer, reducing supply and thus driving overall prices up.
patrickg_zill 9y ago
My understanding was that you can avoid all capital gains taxes via "1031 like kind exchange": you sell your house, buy one elsewhere for about the same amount, and pay no capital gains taxes?
- secabeen 9y ago
  That only works for business property.
- mercutio2 9y ago
  1031 is only for business property. Specifically doesn’t apply to primary residence. But CA Prop 60 allows Californians over 55 to downsize their house and maintain the same tax basis they had before the exchange, which very well might apply here, although IIRC it has weird county by county restrictions.

thescriptkiddie 9y ago

>> 3. Higher property taxes >Yes, this is a bitch in CA...see next point. Property taxes in CA are extremely low. https://en.wikipedia.org/wiki/California_Proposition_13_(1978) https://en.wikipedia.org/wiki/California_Proposition_13_(197...

mbesto 9y ago
That's not the parent's point. If I buy a $1M home in CA 10 years ago and I pay 1% in taxes then and the house is worth $2M 10 years later, I don't get charged 1% of $2M after 10 years. I get charged a marginal increase ever year and this increase isn't based on market norms (I forget what the actual # is, but it would be like paying 1% of $1.25M). This means, if I sell my $2M house after 10 years), and buy another $2M house next door, my taxes are way higher in my second home due to prop 13.
- shostack 9y ago
  Depending on your age, you may be able to not get dinged with the new home's taxed value.[1] [1] http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm