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I'll be an armchair economist and throw out my ideas for why this is happening: * Dramatic increase of inequality in the last 40 years means that wealthiest bu

I'll be an armchair economist and throw out my ideas for why this is happening: * Dramatic increase of inequality in the last 40 years means that wealthiest buyers are determining the price of the entire housing inventory. I know too many people with multiple houses. Related to this, the global slosh of foreign capital looking to launder their money, or park their money in tangible assets. * Perverse incentives in the US tax code. Stepped-up Cost Basis means that aging Baby Boomers are highly incentivized to never sell their homes. After their death, their beneficiaries receive a huge tax benefit. * Many of the economically productive areas of the country have zoning laws which restrict new housing development, which cause scarcity, which drive up the value of existing houses for the benefit of existing homeowners. * There has been almost no productivity increase in the construction industry in the last several decades. Due to their inefficiency, the industry is incentivized towards expensive, higher-profit houses, instead of producing higher volume, lower-cost houses.

Sohcahtoa82 4y ago
> Stepped-up Cost Basis means that aging Baby Boomers are highly incentivized to never sell their homes. After their death, their beneficiaries receive a huge tax benefit. How does that work? If I buy a house for $100K, then sell it 30 years later for $1M, am I really going to get taxed on the $900K gain? And what tax benefit if it's inherited? Does inheriting reset the cost basis so there will never be taxes due on that $900K gain or something?
- HWR_14 4y ago
  > How does that work? If I buy a house for $100K, then sell it 30 years later for $1M, am I really going to get taxed on the $900K gain? You get taxed on a $400k gain. The first $500k of gain (in your primary residence for 3 years) is ignored. In fact, I know (casually) someone who moved in 2021 just to lock in their appreciation at the 500k level. > And what tax benefit if it's inherited? Does inheriting reset the cost basis so there will never be taxes due on that $900K gain or something? Yes. When you inherit property (real estate, stocks, art, etc.) the basis resets to the present fair market value (easy to determine in case of a publicly traded stock, probably requires an appraiser for real estate if you don't sell it quickly.)

Sohcahtoa82 4y ago

> Stepped-up Cost Basis means that aging Baby Boomers are highly incentivized to never sell their homes. After their death, their beneficiaries receive a huge tax benefit. How does that work? If I buy a house for $100K, then sell it 30 years later for $1M, am I really going to get taxed on the $900K gain? And what tax benefit if it's inherited? Does inheriting reset the cost basis so there will never be taxes due on that $900K gain or something?

HWR_14 4y ago
> How does that work? If I buy a house for $100K, then sell it 30 years later for $1M, am I really going to get taxed on the $900K gain? You get taxed on a $400k gain. The first $500k of gain (in your primary residence for 3 years) is ignored. In fact, I know (casually) someone who moved in 2021 just to lock in their appreciation at the 500k level. > And what tax benefit if it's inherited? Does inheriting reset the cost basis so there will never be taxes due on that $900K gain or something? Yes. When you inherit property (real estate, stocks, art, etc.) the basis resets to the present fair market value (easy to determine in case of a publicly traded stock, probably requires an appraiser for real estate if you don't sell it quickly.)