Panetta's goal is to address the dilemma faced by homeowners with valuable properties: whether to sell their homes and face significant tax burdens or keep them, contributing to the scarcity of housing listings. Many homeowners in costly housing markets, such as parts of California, have experienced substantial increases in property values over the years.
The National Association of Realtors (NAR) anticipates that adjusting the capital gains exclusion for inflation since 1997 and raising the exclusion to $450,000 for single filers and $900,000 for joint filers could potentially lead to an increase in housing supply by around 159,000 to 344,000 homes nationwide, easing the inventory crunch. This change could have a more noticeable impact in expensive markets like San Francisco and New York City.
While building new homes can take time, increasing the capital gains tax exclusion could provide an immediate solution to the housing supply challenge, according to Lawrence Yun, the chief economist at NAR. The proposed legislation addresses the need for a more attractive environment for homeowners to sell, potentially stimulating the real estate market, particularly in high-cost areas.