5 ms·

> 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....
    - bzbarsky 9y ago
      You don't get to keep the whole $2M. That's the point.
      - mbesto 9y ago
        Uh what? If I have a house and I sell it for $2M cash and then I buy a house for $1.6M, I now have $400k in cash and $1.6M in assets.
        romwell 9y ago
        Because of the expenses (moving, taxes, fees, etc) amount to $400K, you've just spent a lot of effort to replace a more expensive property with cheaper and smaller one for no gain. Real-life numbers will differ, but that's roughly the point.
        mbesto 9y ago
        Right. See my point here about asset transfer fees and the idea of "gain" or "loss" to wealth: https://news.ycombinator.com/item?id=15708206 https://news.ycombinator.com/item?id=15708206 But there is a gain, you just turned an illiquid asset into a liquid asset. The fact that this exchange is even possible is why you are even able to say "its worth $2M" in the first place. If you couldn't turn an illiquid asset into a liquid asset it would be worth nothing, so you neither "gain" nor "lose". Would you rather have that scenario? Lastly - if you see personal value in purchasing a smaller house, wouldn't you expect service providers (agents, movers, etc) to charge you for that value?
        bzbarsky 9y ago
        If you sell a house for $2M cash and have to pay capital gains taxes, and then buy a house for $1.6M, you do not have $400k in cash afterward.
        mbesto 9y ago
        If you sell it after 2 years and it's your principal residence you do actually have $400k in cash... https://ttlc.intuit.com/questions/3229450-sold-primary-house-in-2015-for-1-5m-basis-500k-gains-1m-purchased-new-primary-house-2015-can-i-roll-the-gains-into-the-new-house-1-6m-and-pay-no-capital-gains https://ttlc.intuit.com/questions/3229450-sold-primary-house...
        bzbarsky 9y ago
        No, you do not. If you buy a house for $1M, sell for $2M, you pay taxes on $500k. Those taxes are ~34% if you're in California, so you pay about $150k in taxes. You buy a house for $1.6M, you have $250k left, not $400k.

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....
  - bzbarsky 9y ago
    You don't get to keep the whole $2M. That's the point.
    - mbesto 9y ago
      Uh what? If I have a house and I sell it for $2M cash and then I buy a house for $1.6M, I now have $400k in cash and $1.6M in assets.
      - romwell 9y ago
        Because of the expenses (moving, taxes, fees, etc) amount to $400K, you've just spent a lot of effort to replace a more expensive property with cheaper and smaller one for no gain. Real-life numbers will differ, but that's roughly the point.
        mbesto 9y ago
        Right. See my point here about asset transfer fees and the idea of "gain" or "loss" to wealth: https://news.ycombinator.com/item?id=15708206 https://news.ycombinator.com/item?id=15708206 But there is a gain, you just turned an illiquid asset into a liquid asset. The fact that this exchange is even possible is why you are even able to say "its worth $2M" in the first place. If you couldn't turn an illiquid asset into a liquid asset it would be worth nothing, so you neither "gain" nor "lose". Would you rather have that scenario? Lastly - if you see personal value in purchasing a smaller house, wouldn't you expect service providers (agents, movers, etc) to charge you for that value?
      - bzbarsky 9y ago
        If you sell a house for $2M cash and have to pay capital gains taxes, and then buy a house for $1.6M, you do not have $400k in cash afterward.
        mbesto 9y ago
        If you sell it after 2 years and it's your principal residence you do actually have $400k in cash... https://ttlc.intuit.com/questions/3229450-sold-primary-house-in-2015-for-1-5m-basis-500k-gains-1m-purchased-new-primary-house-2015-can-i-roll-the-gains-into-the-new-house-1-6m-and-pay-no-capital-gains https://ttlc.intuit.com/questions/3229450-sold-primary-house...
        bzbarsky 9y ago
        No, you do not. If you buy a house for $1M, sell for $2M, you pay taxes on $500k. Those taxes are ~34% if you're in California, so you pay about $150k in taxes. You buy a house for $1.6M, you have $250k left, not $400k.