Will Fiscal Cliff Fears Affect Livermore Valley Real Estate?

The view from the top of the market is clouded by tax fears, according to recent articles by CNBC. The prospect of a capital gains tax hike has caused affluent home sellers to take price discounts now, rather than face an uncertain tax future. RealtyTrac reports that national home prices in the $1 million-plus range have fallen by 20% during 2012.

Here’s why luxury home sellers are concerned: unless Congress prevents it, a “fiscal cliff” of expiring tax breaks and Federal spending cuts could begin January 1, 2013. Affluent Americans face a possible capital gains tax increase from 15% to 20%. While the first $500,000 gain is exempt if the home was a primary residence for two out of five years, it’s a scant tax shelter at the top. Therefore, affluent home sellers are seeking to close their deals during 2012.

Can the selling behaviors at the top of the market affect home values across the board? And what could it mean for Livermore Valley real estate?

By adding inventory to the real estate market, while accepting price discounts for a quick sale, there is concern that motivated luxury sellers could cool down the market. And if sale prices trend downward on luxury homes, home values in the nearest tier could take a step down, and so on.

However, Livermore Valley is a well-balanced market. The majority of Livermore Valley homes for sale are priced under $600,000. While we have about 25 homes on the market priced at $1 million or more, this does not indicate an exodus. Home sellers in the top price range will affect each other. Those seeking to minimize tax obligations  will likely take a price discount to close during 2012, but this would not be a large share of the market. Still, this could impact high-end homes that were not otherwise affected by timing concerns.

Home sales in Livermore, Dublin and Pleasanton could slow down a bit in the months ahead, due to seasonal patterns and the distractions of an election year. Overall, Livermore Valley remains attractive for home buyers, and escalating rents will continue to drive first-time buyers into the market. So long as employment remains stable and the broader economy behaves, our market will be driven by practical motives, and not short-term strategies.

When you have questions about the Livermore Valley real estate market, contact me! I have the local market expertise you can count on for Livermore, Pleasanton and Dublin! Whether you are buying or selling a home, I will provide the latest market data and the professional guidance you need.

John Kurtzer
Your Livermore Real Estate Expert
RE/MAX Accord

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