An End to Bush-Era Tax Cuts Could Push High-End Properties Onto Market

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Some well-heeled homeowners are reportedly scrambling to offload luxury properties by the end of the year or else risk having a serious bite taken out of their bottom lines. That's because if the Bush-era capital-gains tax cuts expire in January, as they are expected to, those homeowners would be shelling out a lot more on sales.

Patty Lance, a Realtor at Coldwell Banker Previews International who handles listings in Newport Beach, Calif., said there's such a rush to sell among silver spooners that she's decided to target them by hosting webinars on the tax hike's effect on home sales.

"Sophisticated investors are looking at this, saying, 'Maybe we need to focus on this right now and time it with the market heating up,'" she said in explaining the reason for her Web seminars. "They are starting to feel that they need to do something in the third quarter, fourth quarter [of 2012] and jump on this."

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Cities Where Homes Sell the Fastest
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An End to Bush-Era Tax Cuts Could Push High-End Properties Onto Market

Homes are selling faster in the majority of U.S. markets than they were a year ago, according to data recently released by Realtor.com. Ten areas in particular are sweet spots if you're selling a home.

The metropolitan areas on this list of the cities where homes sell the fastest tend to be in states that have been hardest hit by the economic downturn. Five of the metropolitan areas are in California.

Click through the gallery to find out where homesellers have the best shot at getting their house sold -- and fast.

Read more at 24/7 Wall St.

Photo: Flickr/dherrera_96

Average number of days homes spend on market: 48
Median home price: $185,000 (73rd highest)
Population: 4,192,887 (20th highest)
Unemployment: 7.72% (65th highest)

The entire metropolitan area of Phoenix-Mesa, which has a population of more than 4 million, had 13,912 homes listed on the market in June -- the 20th highest of all the metropolitan areas surveyed. This is a drop of almost 40 percent since the same time last year. Speedy home-selling may be boosting the housing market in the Phoenix area.

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Find homes for sale and for rent in the Phoenix area.


Photo: Flickr/humbertomoreno

Average number of days on market: 47
Median home price: $99,000 (the lowest)
Population: 4,296,250 (18th highest)
Unemployment: 11.21% (ninth highest)

Unlike many of the metropolitan areas on the list with high home values, in Detroit, there are many bargains to go around for homebuyers. Of the 146 regions surveyed by Realtor.com, only Detroit had a median home value below $100,000 last month. Housing prices in the area did not manage to crack through the six-figure ceiling despite increasing 10 percent from last year, a much higher rate than the national average of 2.68 percent increase. This has sparked much interest among buyers.

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Find homes for sale and for rent in Detroit.


Photo: Flickr/Bernt Rostad

Average number of days on market: 45
Median home price: $549,000 (third highest)
Population: 1,836,911 (39th highest)
Unemployment: 8.89% (34th highest)

California was hit hard during the housing downturn, and San Jose has been no exception. From the first quarter of 2007 to the fourth quarter of 2011, home prices plunged 32.9 percent. Nevertheless, the median price of one of the 3,621 houses listed is still an impressive $549,000, the second highest of all home prices on the list and the third highest of all metropolitan areas surveyed. Buyers should not dawdle either.

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Find homes for sale and for rent in San Jose, Calif.


Photo: Flickr/the_tahoe_guy

Average number of days on market: 45
Median home price: $725,000 (the highest)
Population: 4,335,391 (17th highest)
Unemployment: 7.52% (68th lowest)

While Detroit’s median home listing price is less than $100,000, the median home price of $725,000 in the San Francisco area is the highest measured in the Realtor.com report. Yet, despite the high prices of homes, there isn't too much idle time on the market, as the average home is sold in 45 days.

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Find homes for sale and for rent in San Francisco.


Photo: Flickr/El Frito

Average number of days on market: 45
Median home price: $350,000 (17th highest)
Population: 3,439,809 (21st highest)
Unemployment: 7.40% (56th lowest)

The Seattle metropolitan area has a population of more than 3.4 million people, yet only 6,486 homes available for sale. With such conditions, it is not surprising that homes will get snatched up pretty quickly. Houses on average sit just 45 days on the market, which is down nearly 34% since last year.

Read more at 24/7 Wall St.

Find homes for sale and for rent in the Seattle area.


Photo: Flickr/dherrera_96

Average number of days on market: 44
Median home price: $149,500 (23rd lowest)
Population: 839,631 (60th lowest)
Unemployment: 14.14% (fourth highest)

Bakersfield joins many other California cities in selling homes fast, but houses in the area are not likely to have San Francisco-like prices. The median home price of $149,500 is the lowest on this list, except for Detroit, and only a little more than a fifth of the median price of a San Francisco house.

Read more at 24/7 Wall St.

Find homes for sale and for rent in Bakersfield, Calif.


Photo: Wikimedia/Bobak Ha'Eri

Average number of days on market: 43
Median home price: $174,900 (58th lowest)
Population: 930,450 (62nd highest)
Unemployment: 15.54% (second highest)

Fresno has many similarities to Bakersfield. The median home price of $174,900 recorded in June is far lower than other California cities such as San Francisco and San Jose, but it is up 10 percent from a year earlier. Similar to Bakersfield, the 2,237 houses on the market are nearly half (49.1 percent) the number that were available last year.

Read more at 24/7 Wall St.

Find homes for sale and for rent in Fresno, Calif.


Photo: Flickr/Mel B.

Average number of days on market: 43
Median home price: $289,500 (23rd highest)
Population: 380,821 (20th lowest)
Unemployment: 6.13% (22nd lowest)

Prospective homebuyers in Anchorage really do not have the option of being choosy. There are only 1,120 houses on the market, a decline of about 29 percent from the previous year. This is the fourth-smallest number of home listings in all metropolitan areas surveyed.

Read more at 24/7 Wall St.

Find homes for sale and for rent in Anchorage, Alaska.


Photo: Flickr/Wonderlane

Average number of days on market: 33
Median home price: $269,000 (27th highest)
Population: 2,543,482 (27th highest)
Unemployment: 7.51% (67th lowest)

The 33 days to sell a house in the Denver area is actually up by 10 percent, one of the very few metro areas to see an increase in the time it takes to sell a home. Denver was not as hard hit by the housing bust as many other metropolitan areas. Home prices from their peak in the first quarter of 2006 to the fourth quarter of 2011 dropped just 11.1 percent, well below the national average of 34.2 percent.

Read more at 24/7 Wall St.

Find homes for sale and for rent in Denver.


Photo: Flickr/Nokero

Average number of days on market: 24
Median home price: $379,000 (12th highest)
Population: 4,335,391 (16th highest)
Unemployment: 9.56% (20th highest)

If you want a house in Oakland, you had better grab it while it’s hot. The average house in Oakland is sold 24 days after its been on the market, the fastest of all metro areas by a sizable nine days.

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Find homes for sale and for rent in Oakland, Calif.


Photo: Flickr/hortulus

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And it seems that homeowners in the high-end market might already be doing that. Average sales of homes priced at $1 million or more are up 23 percent from a year ago, according to online listing service RealtyTrac. Also, the company said that the average sales price in the million-plus category -- at $2,067,157 in May -- had dropped 12 percent from last year. That could be a sign that sellers are becoming more willing to accept lower offers.

Meanwhile, median home prices increased year-over-year by 2 percent in May 2012 compared to the same period last year, CoreLogic reported.

'We're Telling Them to Take the Profits Right Now'

Currently, an individualwho makes a profit of $250,000 or more on the sale of his or her primary residence ($500,000 or more for a married couple) must pay a 15 percent tax on that profit (minus deductions including renovation costs and closing costs).

But if the Bush-era capital-gains tax cuts expire, the tax rate on such proceeds will jump to 20 percent. Plus, starting in 2013, individuals who make at least $200,000 in income (or married couples making at least $250,000) will have to pay an additional 3.8 percent health-care tax on capital gains. The legislation is set to go into effect in 2013.

In all, the tax hikes stand to bring the cumulative tax rate on gains from luxury-home sales up by 8.8 percent to 23.8 percent. To be sure, the expiration of the capital-gains tax cuts is by no means a done deal: Presumptive Republican presidential nominee Mitt Romney has vowed to extend them. And the House of Representatives -- with mostly Republican support -- voted Friday to extend them for one year, despite opposition from the Senate and President Barack Obama.

But the possibility of the tax increase creates quite the incentive for high-end homeowners to sell before the new year, said Vijay J. Marolia, chief investment officer at Private Wealth Management.

"We're telling them to take the profits right now," he said of his high-net-worth clients. "We really feel strongly that taxes are going to go up in the future. The government needs revenues." Marolia, like Lance, advises clients in the luxury home market.

One of Lance's clients is a couple who originally bought their home for about $100,000, she said. But after renovations and price appreciation, it's now worth about $9 million. After deductions, including renovations and closing costs, the couple would get taxed on about $5 million if the home sells for its asking price, she said.

If the capital-gains tax cuts expire and they sell next year, the couple would have to fork over about $1.19 million to Uncle Sam. But if they sell this year, they'll only have to pay around $750,000. That would amount to a savings of about $440,000 for the couple.

'Sellers Are More Motivated to Listen'

Due to the potential for such savings, "sellers are more motivated to listen and work with an option," and negotiate with potential buyers, said Frances Katzen, a Realtor at Prudential Douglas Elliman Real Estate, who moves swanky residences in New York City.

Katzen recently closed a $10 million sale in which she said the expected tax increase was "an impacting driver" in her clients' mentalities as sellers. She also said that she's currently working with one person, a bigwig at JPMorgan Chase, who also wants to beat the possible tax increase.

The trend could potentially deal a blow to the housing market, as it did in 2010 when affluent homeowners were worried that Congress would raise the capital gains tax. At the time, sellers flooded the high-end market with supply, pushing down home prices, CNBC.com reported.

Marolia said that he expects the supply of luxury homes to increase partly because of the pending tax increases, but even more so because of the growing perception that home prices are on the upswing. He said that should coax more homeowners to put their homes up for sale.

Other experts have said that the luxury market has reached a crossroads, where sellers who previously withheld their homes from the market in the hope that prices would rise have now given up on substantial appreciation.

So far this year, the supply of $1 million-plus homes has increased 15.7 percent, RealtyTrac reported.

However, both Lance and Katzen said there's more than enough demand to offset any downward pressure on prices created by swelling inventory.

"We have so many buyers sitting on the fencepost right now," Lance said.

See also:
Michigan Man Buys County's Entire Foreclosure Stock
'This Is Crazy': Company Snatches Condos from Owners
90% of Bank-Owned Homes Held Off Market, Estimates Suggest

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