Could the More Homes on the Market Act Bring More Homes to the Market in Red Rocks Ranch?
One of the biggest challenges in today's real estate market is not necessarily a lack of buyers.
It is a lack of homeowners who want to sell.
Even in a newer community like Red Rocks Ranch, this can be an issue. If you purchased your home during the earlier phases of the development, there is a good chance you may have already built substantial equity as home prices and new construction costs have increased.
For some homeowners, that equity is great news. But significant appreciation can also become part of the decision when it comes time to sell.
That is why proposed federal legislation called the More Homes on the Market Act is worth watching.
If passed, the legislation could make it financially easier for some homeowners with substantial appreciation to sell their properties, potentially bringing additional resale inventory into communities such as Red Rocks Ranch.
What Is the More Homes on the Market Act?
Under current federal tax law, qualifying homeowners can generally exclude up to $250,000 of capital gain from the sale of their primary residence for an individual taxpayer and up to $500,000 for married couples filing jointly.
Those limits were established in 1997 and have not kept pace with the substantial increase in home values since then.
The proposed More Homes on the Market Act would increase those exclusions to $500,000 for individual filers and $1,000,000 for married couples filing jointly. The proposal would also provide for future inflation adjustments.
It is important to understand that this is proposed legislation and has not become law.
Why Could This Matter in Red Rocks Ranch?
Red Rocks Ranch presents an interesting situation because we have homeowners who purchased during the earlier phases of the community alongside buyers purchasing brand new homes today.
If you were one of those early Red Rocks Ranch buyers, compare what you originally paid with what similar homes are selling for today.
You may be pleasantly surprised by how much equity you have accumulated.
That equity can give homeowners options. You may be considering moving to a larger home, downsizing into a ranch plan, relocating or simply taking advantage of the equity you have built.
But as appreciation grows, potential capital gains taxes can become another consideration when deciding whether it makes financial sense to sell.
Could Capital Gains Taxes Keep Some Owners From Selling?
Potentially.
Imagine a homeowner who purchased early in Red Rocks Ranch and has experienced substantial appreciation.
They may be ready for their next move, but if selling creates a significant taxable gain, that can become another reason to remain in the home.
The More Homes on the Market Act is intended to reduce that potential obstacle by substantially increasing the amount of gain qualifying homeowners could exclude from federal capital gains taxation.
For homeowners with significant equity, that could change the financial calculation surrounding a sale.
Of course, every homeowner's situation is different. Your original purchase price is not necessarily your tax basis, and qualifying improvements, selling expenses and other factors can affect the calculation. This is an area where homeowners should work with their CPA or qualified tax professional.
Red Rocks Ranch Has Another Interesting Dynamic
One thing that makes Red Rocks Ranch different from many established neighborhoods is that resale homes are competing alongside new construction.
That creates choices for buyers.
Some buyers simply want brand new construction. Others may prefer a resale home that is already completed, has landscaping, window coverings and other improvements installed and does not require waiting months for construction to be finished. Also living and working from home during all the noise from New Construction could be a challenge.
As more original Red Rocks Ranch homeowners eventually decide to move, I expect the resale market to become an increasingly important part of the community.
Changes to the capital gains exclusion could potentially encourage some of those homeowners to sell sooner.
More Sellers Could Create More Buyers
This is one of the interesting aspects of the More Homes on the Market Act.
A homeowner who sells usually does not disappear from the housing market. They often become a buyer somewhere else.
That could be particularly interesting within Red Rocks Ranch itself.
Someone who purchased a larger two story home several years ago might now prefer a ranch plan or a home with a main floor primary suite(such as the new townhomes being built).
With the Lakeside Collection townhomes now offering additional choices, along with ranch options such as the Springdale in the Monarch Series and larger ranch floor plans in the Grand Collection, homeowners may have opportunities to change the type of home they own without necessarily leaving Red Rocks Ranch.
That creates movement within the community.
One homeowner sells.
Another buyer moves in.
The seller purchases another home.
And another housing opportunity is created.
Could This Increase Housing Supply?
That is the goal.
The theory behind the More Homes on the Market Act is relatively straightforward.
If capital gains taxes are one of the reasons some longtime homeowners are reluctant to sell, increasing the exclusion could remove or reduce that obstacle.
More homeowners might then decide to put their properties on the market.
That would increase the number of homes available to buyers.
It could also generate additional demand because many of those sellers would subsequently purchase another property.
Of course, capital gains taxes are only one part of the decision.
Mortgage rates, replacement housing costs, property taxes, insurance and lifestyle considerations all influence whether someone decides to move.
The legislation would not suddenly cause every homeowner with equity to sell.
But it could remove one financial obstacle for homeowners who are already considering a move.
Thinking About Selling Your Red Rocks Ranch Home?
If you purchased early in Red Rocks Ranch, this may be a good time to find out exactly how much your home is worth.
You might have considerably more equity than you realize.
You do not need to wait for Congress to act to start evaluating your options. We can look at your home's current market value, what you originally paid, how it compares with both recent resale properties and today's new construction, and what your next move might look like.
For questions regarding your potential capital gains tax, I always recommend speaking with a CPA or qualified tax professional.
Sometimes understanding your equity is the first step toward discovering that you have more options than you thought.
Andrew Nagel
RE/MAX of Cherry Creek
Red Rocks Ranch Real Estate Specialist
303 898 4572
RedRocksRanchRealEstate.com
This article is provided for general informational purposes only and is not tax or legal advice. Consult a qualified tax professional or attorney regarding your individual circumstances.