Update: SB-1116 passed through the Senate Governance & Finance Committee on May 9th by a vote of 6-0. The bill is scheduled to be heard on May 22nd in front of the Senate Appropriations Committee.
As recently discussed here, “the stock market is up, unemployment is down, and wages are rising, yet homeownership in Orange County is declining steadily.” The problem, however, is of course not limited to Orange County. California is in the midst of a homeownership crisis.
Lack of housing inventory has made for an ultra-competitive environment for potential buyers. For first-time buyers, finding a home is especially difficult.
The real estate transaction is incredibly complicated, and when most are looking to sell their home they are simultaneously focused on their next move. All-cash buyers and those with a large down-payment are appealing to sellers because the risk of falling out of escrow is very low. First-time buyers, however, are often approaching a transaction with as little as 3.5% down. This puts them at a natural disadvantage, and a sellers market only exacerbates this problem.
According to ATTOM Data Solutions, 10% of sales in 2006 were all-cash sales. In 2017, that number was up to 29%.
The Orange County REALTORS(R) are working with State Senator John Moorlach to solve this problem. There are many first-time homebuyer programs, but none do much to address the problem stated above. SB 1116 – the First Time Homebuyers Affordability Act, however, incentivizes the seller to sell to a first-time homebuyer by increasing the capital gains exclusion.
Currently, if you have lived in your home for 2 out of the last 5 years you can exclude $250,000 for single filers and $500,000 for married couples filing jointly from your state and federal tax liability. SB 1116 would increase the state exclusion to $300,000 for single filers and $600,000 for married couples filing jointly if they sell to a first-time homebuyer. The Orange County REALTORS(R) believe that this will better level the playing field for first-time buyers.
Please call your state senator to support this helpful piece of legislation.