Episode Details

Housing shortages are hitting buyers hard, especially first-timers, as bidding wars rage for scarce inventory. The culprit? The “lock-in” effect—homeowners stuck with ultra-low mortgage rates years ago, plus property tax breaks from Proposition 13 and fears of capital gains taxes, making selling unattractive. Economists urge more construction, but space is limited in places like Southern California. So the focus is shifting: how to incentivize sellers? A key idea: reforming capital gains tax on home sales. Right now, selling a primary residence for a big profit can trigger tens of thousands in taxes. Several bills in Congress aim to fix this—raising exemptions, indexing them to inflation, or even eliminating the tax for primary homes. While experts debate impact, easing the burden could unlock more inventory, especially in high-cost markets like California, where every new listing matters.

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