Why So Many Seniors Are Staying in Large Homes. And What That Means for the Housing Market

By Alan Jacobson
Licensed Realtor | US: 561-596-2191 | MX: +52 415 105 4555
🌐 alanjacobsonrealtor.com 

The American housing market is in a bind, and if you’ve been looking to buy or sell lately, you’ve probably felt it. One of the biggest issues? A lot of inventory is tied up in homes that simply aren’t changing hands.

Many of those homes belong to older Americans who, for good reason, are choosing to stay put. But the reason might surprise you, it’s not always about lifestyle or health. A major factor is capital gains tax.

The Tax Problem No One Talks About

If you're over 65 and have lived in your home for decades, chances are you've seen incredible appreciation. But that also means when you sell, you could be hit with a significant tax bill on your profits.

Under the current law, homeowners are only exempt from paying capital gains tax on the first $250,000 of profit if single, or $500,000 if married. That made sense when the rule was created in 1997—but home values have skyrocketed since then.

For example:
Bought your home in 2000 for $150,000 and today it’s worth $550,000? That’s a $400,000 gain. If you're single, you'll pay tax on $150,000 of that, about $30,000 or more, depending on your state.

That’s enough to make anyone pause before listing their home.

How It Affects the Market

This tax burden is causing many retirees to stay in homes that are far larger than they need. That, in turn, keeps millions of entry-level and family-friendly homes off the market, making it harder for:

• Young families to find space to grow

• First-time buyers to enter the market

• Renters to move up into ownership

It’s a domino effect that clogs up the entire system.

The Case for Change

I believe it’s time we adjust the capital gains exclusions to reflect modern home values. Increasing the exemption to $500,000 for singles and $1 million for couples would allow many seniors to move without facing a heavy penalty, freeing up housing stock in the process.

This isn’t just a win for retirees. It’s a win for buyers, sellers, the labor market, and the economy as a whole.

What Can You Do Now?

Until lawmakers make a change, you do have options:

• Talk to a tax professional about strategies to reduce your liability.

• Consider downsizing within states with no capital gains tax.

• Work with a knowledgeable agent (like me) who understands how to navigate these unique situations.

Whether you're thinking about selling now or just planning for the future, I’m here to help you make sense of your options, and find the best path forward.

Let’s chat about your next move....without the surprise tax bill.

📞 US: 561-596-2191
📞 MX: +52 415 105 4555
🌐 alanjacobsonrealtor.com