Case-Shiller: Prices Gains Slow Slightly in August

Let’s have a look at the latest data from the Case-Shiller Home Price Index. According to August data that was released today, Seattle-area home prices were:

Up 0.3 percent July to August
Up 7.6 percent YOY.
Down 4.4 percent from the July 2007 peak

Last year at this time prices were flat month-over-month and year-over-year prices were up 6.5 percent.

The Seattle area’s month-over-month home price change was slightly smaller in August than the month before, but stronger than last year. As a result, the year-over-year pric change rose to its highest level since June of last year.

Here’s a Tableau Public interactive graph of the year-over-year change for all twenty Case-Shiller-tracked cities. Check and un-check the boxes on the right to modify which cities are showing:

Seattle’s rank for month-over-month changes rose from #16 in July to #12 in August.

Case-Shiller HPI: Month-to-Month

Hit the jump for the rest of our monthly Case-Shiller charts, including the interactive chart of raw index data for all 20 cities.

In August, four of the twenty Case-Shiller-tracked cities gained more year-over-year than Seattle (the same number as July):

  • San Francisco at +10.7%
  • Denver at +10.7%
  • Portland at +9.4%
  • Dallas at +8.9%

Denver, Dallas, Portland, and Boston all hit new all-time highs in August.

Fifteen cities gained less than Seattle as of August: Miami, Los Angeles, Tampa, Las Vegas, San Diego, Atlanta, Detroit, Phoenix, Charlotte, Boston, Minneapolis, Cleveland, Washington, Chicago, and New York.

Here’s the interactive chart of the raw HPI for all twenty cities through August.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

Case-Shiller HPI: Decline From Peak

In the ninety-seven months since the price peak in Seattle prices are down 4.4 percent.

Lastly, let’s see what month in the past Seattle’s current prices most compare to. As of August 2015, Seattle prices are approximately where they were in September 2006.

Case-Shiller: Seattle Home Price Index

Check back tomorrow for our monthly look at Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 2015-10-27)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

50 comments:

  1. 1
    GoHawks says:

    A little bit of a deceiving headline. It could also read “annual price gains accelerate in August” given that the year over year number this August was stronger than in Aug 2014. 2015 was very similar to 2014. Seems like 2016 will be the same way without any inventory relief.

    Thanks for all of your work Tim.

  2. 2
    ess says:

    Denver apparently is the place to be for a hot real estate market. Also SF shows no signs of slowing down year over year.

    Note the article indicates that the increase of prices is related to supply. That certainly applies to Seattle, and that factor will have implications as to where the market in Seattle and area is heading, especially if the pundits are correct and population increases as they indicate.

    http://www.marketwatch.com/story/city-by-city-look-at-us-house-prices-as-denver-surge-continues-2015-10-27

  3. 3
    whatsmyname says:

    Here’s a thought experiment: Go the the raw data chart, (2nd one), and push the time frame back to Jan 2000 to include the base 100 value. Now blank out all those cities Tim shows you each month, and click on Atlanta, Charlotte, Cleveland, Dallas, and Detroit. These five represent 25% of the CSI 20. These cities spent the “bubble” years doing about +/- 1% over average core inflation, (here’s a chart) http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

    1. Do these kinds of returns amount to a speculative bubble?
    2. If not, are the subsequent downward changes more reflective of serious recession than bubble burst?
    3. Is there some proportionality that may be applied to the corrections in more robust markets?
    4. If, as some say, the CRA was forcing lenders to shower all their money on the poor, why did these five (especially) not do so well?

    Now go back and click All. Is the incredible diversity of current HPI results, (ranging from 100 – 240), the result of a single monetary policy common to all?

  4. 4
    sleepless says:

    The FED is not raising rates, the show must go on. The stocks are heading back to the all times highs… No housing crash in 2016. Now I am looking at 2018 as in 2016, most probably, new QE4/NIRP will be announced and 2017 will be the result of QE4/NIRP “momentum”. So 2018 or even 2019 now…

  5. 5

    Is Seattle Real Estate and Building Materials Tied to $45/bbl Stable Oil Prices?

    Nuclear fusion is near according to Time magazine. Kiss coal and oil good-bye when fusion comes with no radioactive waste [by product is just helium]and the carbon footprint disappears overnight. I can’t wait….SWE would buy an electric car then [today if we all went electric cars, there would be rolling blackouts].

    Today’s carbon footprint is a near term tomorrow’s elimination?

  6. 6

    RE: sleepless @ 4
    Watch the Stocks Plummet

    When real prices are tied to $45/bbl oil [not this phony $120/bbl]….I just bought gas for a $1.85/gal [with Washington’s 50 cent/gal taxes]….that $30K pea sized car and hybrid many drive today are jokes?

    Did many of us all buy the wrong types of cars?

  7. 7
    Boxkicker says:

    Just closed on my sale of my 4BR/3BA/2400SF/Built in 1988 home today in Maple Valley.

    I bought in April 2011 for $350,000

    I sold in October 2015 for $415,500

    Didn’t put much into it at all but the initial paint job before I moved in and new garage doors in the last few months.

    Still moving up around the area! I didn’t worry about a place to live in the Puget Sound area as I took a promotion and moved to Spokane.

  8. 8
    Erik says:

    RE: Boxkicker @ 7
    Good job buying 2011. Timing is everything.

  9. 9
    buford says:

    Some back of napkin math:

    $415,500 – $37,350 (9% to sell) = $377,650
    $377,650 – $350,000 (purchase) = $27,650 net over 4 years

    Property taxes?
    Maintenance?
    Interest on the loan?
    Sounds real close to breaking even to me.
    Better than paying rent I guess, but IMO, not really worth saying “woo-hoo -look at me” over……

  10. 10

    RE: Boxkicker @ 7
    Good Job Box Kicker

    The $65K Capital Gain has a 3 year delay before taxes are due, if you don’t buy a similar priced house in Spokane ? The tax laws keep changing, so I added the question mark to be answered by a good tax accountant. All your other expenses are closing costs buying/selling, the maintenance on the new house in Spokane and moving expenses. The $65K should more than cover this.

  11. 11
    Boxkicker says:

    RE: softwarengineer @ 9

    I will deal with whatever comes my way! Just glad to have it sold and very quickly! Took 1 day to get the offer of $16K over asking!

  12. 12

    RE: Erik @ 8
    Hey Erik

    You always reinvest your capital gains? What are the current tax laws to avoid capital gain payment?

  13. 13

    RE: Boxkicker @ 10
    Congratulations on your job promotion moving west where the cheap real estate is. My daughter’s significant other is betting on a promotion soon in Kansas City…..he currently works for H&R Block corporate in the downtown sky scraper upper floors. This would double his pay BTW.

    Who’d guess….job promotions with real estate price degradation is possible and likely.

  14. 14
    Boxkicker says:

    RE: softwarengineer @ 11

    I wouldn’t owe any capital gains taxes….

    The home sale exclusion — homeowners are entitled to when they sell their primary residence for a gain after having lived in the home for at least two of the five years immediately preceding the sale.

    Couples can shelter up to $500,000.

    What you are thinking is…under old law, if you sold a house before May 7, 1997, you could only claim the exclusion if you used the proceeds from the sale of your home to buy another house within two years; this was sometimes referred to as the “rollover rule.” This rule no longer applies. The IRS doesn’t care what you do with the proceeds from the sale

  15. 15

    RE: softwarengineer @ 12
    Update

    I meant moving east…

  16. 16

    RE: Boxkicker @ 14
    Kary Says There’s Exclusions to Your Interpretation of Tax Laws Today

    Past short sells come to mind…..they want all the money back on principle forgiveness that we once thought was all profit. Garnishment of wages is used too. I plea guilty to not knowing the plethora of exclusions on Capital Gains….2015 is new rules yet to be ironed out because of the $20T debt limit ceiling negotiations to avoid more government furloughs and a shutdown… Dec 11 is the deadline, coming soon, then we’ll know more.

  17. 17

    RE: buford @ 9
    Yeah, the 5 Year Rule

    Expenses buying [stress should be included too] before owning 5-10 years make renting generally affordable without all the legal obligations.

  18. 18
    ess says:

    As per owning a house, don’t forget the tax write off one obtains for what was paid in interest, as well as taxes if one itemizes. During the first few years of a loan, that can be considerable, and that savings should also be part of the equation. And rising property taxes in an area that never met an initiative that was funded by real estate that wasn’t loved is also nothing to sneeze at (even if it is flu season). If you had rented a comparable place – you would have not had the increase in value, tax write offs, and your rent would have escalated from where it had started

  19. 19
    Boxkicker says:

    RE: buford @ 9

    VA Loan-0% Down-No Funding Fee

    3.375% Interest Rate

    Itemized my taxes and always received a refund.

    $16K over asking on the first day of sale.

    Maintenance? What’s that? Buyers had me fix NOTHING!!! Didn’t put much into the house but a interior paint job and new garage doors. Same AC, Same Heater, Same Water Heater, Same Kitchen, Same single pane Windows.

    It may not be all whoop whoop worthy in your eyes, but I did pretty good on the deal.

  20. 20
    buford says:

    RE: Boxkicker @ 19
    Sorry, I didn’t mean to rain on you the way I did. You did good. (free (or very cheap) rent is always good)
    I just try to add real world numbers to things like this.

    My point is that $27,650 gain isn’t reflecting the probable $20,000 tax bill over 4 years.
    Garage door and paint probably was at least another $4 or 5k.

    Interest deduction is only a percentage of total. $12k in deductible interest at say 20% tax rate is still $9,600 of cold hard cash that the interest cost you after factoring the deductibility.

    Factor in the added potential for stress and legal issues like SWE says and one might question the logic of owning vs renting.

    Enjoy Spokane. It is a great area to live.

  21. 21
    boater says:

    RE: buford @ 20
    Ok but shouldnt you add in the rent you would have paid for a similar sized home to your calculation if you’re going to do apples to apples. Compare how much money two equivalent income persons renting vs owning the same house over the same period.

    It’s a tradeoff. If you own you get the risk and reward of appreciation vs the risk/reward of rental prices. Currently in Seattle the own is a pretty clear winner. That won’t always be the case but it certainly has been true for the last 5 years.

  22. 22
    buford says:

    RE: boater @ 21

    I agree, but the thing is that when you rent you are reasonably assured what the financial outcome will be.
    There is absolutely no way to be certain of the financial outcome when buying, especially back in the 2011 period.

    And as an aside, I wasn’t trying to compare rent vs own.
    Just trying to show an example that the costs of ownership that accrue over time are quite often overlooked when people compute what the financial gain actually looks like.

  23. 23
    boater says:

    RE: buford @ 22
    I can’t say I agree with that statement. I doubt the people renting in 2010 expected their rent to go up 30%+ in five years.

    I guess you could say you trade off the certainty of location and price for the certainty of price. A home owner can guarantee where they are going to live and roughly the price. A renter can roughly guarantee what they are going to pay but have little certainty of where for a given price.

  24. 24
    buford says:

    RE: boater @ 23

    True, but not everybody operates on a “staying put for 5 to seven years” horizon.

    And rents haven’t gone up 30 % everywhere.
    Seattle metro…yeah.
    Generally through out the region…. not necessarily.

  25. 25
    Boxkicker says:

    RE: buford @ 20

    No rain here!

    If I broke even, I am cool with that. Almost living for free for 4+ years. Kids graduated from a great school district and moved away also.

    This was a very painless sale and that was even as the buyer was using FHA. No request from the buyer or FHA to fix a dang thing and came at appraisal.

    Just in the month I have been over here, it is a nice refreshing change.

    The check from the sale I got in my bank account today tops it all off!

  26. 26
    Erik says:

    RE: softwarengineer @ 12
    If you have made a house your primary residence 2 of the last 5 years, you don’t have to pay capital gains tax. There are some limitations, but that is how it works.

    I lived in a house 2 years that I purchased. I rented it out 2 years. I still qualified as a primary resident. In those 2 years I rented the house out, I bought a condo and sold it after 2 years and a month and didn’t pay capital gains. Take advantage of this tax loophole as much as possible. I do.

  27. 27
    Erik says:

    RE: Boxkicker @ 25
    There are a lot of jealous people on this site. I made $128k from the place I bought in 2011 and sold in 2013. I talked about it on here and people got very angry. Ignore them. If they were smarter, they’d have done it themselves.

  28. 28
    redmondjp says:

    RE: Erik @ 27 – How much money you made has nothing to do with why people got so angry with you.

  29. 29
    kenmorem says:

    RE: Erik @ 26

    not true. the 2 in 5 year tax exclusion no longer applies for sale of primary residence. rather, it’s now prorated based on duration of how long it was your primary residence.

    example: live there for 8 years, rent for 2 year. pay 20% of capital gains.

  30. 30
    buford says:

    Mark Hanson’s 10-28-15 take on the current R/E market:

    http://mhanson.com/archives/1948

    At peak bubble, all that it takes is a narrow and shallow stream of a few dumb money buyers to keep the prices of thousands of houses bubbled out, indefinitely. Most everybody else is just hanging on for the ride, unable to transact due to the unaffordability. Then one day market suddenly runs out of dumb money buyers, which is the Wile E. Coyote moment.

    Housing bubbles don’t exist in isolation; when the known bubbles finally pop, it will take the rest with it.

    Some will say, “you are full of crap, based on rents house prices are cheap”. Well, that’s of course, unless, rents are in a bubble too. I believe they are. It’s obvious in major metros. But, look at Phoenix Arizona, for example, where over 50% of households can’t afford the average rent on a two bedroom apartment, based pm data put out by ARMLS in Q2’15.

    http://mhanson.com/archives/1948

  31. 31
    Boxkicker says:

    RE: kenmorem @ 29

    Why come on here and give out false information? You need to do some more research as your post is false as can be!!!!

    Here is the real information:

    The tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home.

    The type of home involved is less important. A single-family home, condominium, cooperative apartment, mobile home, or houseboat can all count as a residence.

    How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if the following is true:

    -You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.

    -You did not acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.

    -You did not claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

  32. 32
    kenmorem says:

    RE: buford @ 30

    feel free to pick apart — i would like to know the truth as well. read:
    http://www.financialsamurai.com/invest-in-real-estate-for-capital-appreciation-rental-income-or-lifestyle/#comments

    here’s the post that caught my eye regarding cap gains taxes:
    —————————–
    Well, I hate to be the bearer of bad news, but the rule changed a bit starting January 1, 2009. It used to be that the $250,000/$500,000 exclusion applied so long as you lived in the home for any 24 months of the 5 years preceding sale. Now there’s an exception to the exception to the rule in section 121(b)(4). (Note: it’s the second subparagraph (4) under subsection (b)–apparently the legislature mistakenly enacted two sections called (b)(4).) The IRS chomps away at the $250k/$500k exclusion amount based on a proration of the amount of time that you’ve held the property as a rental since January 1, 2009 (note that it goes back more than 5 years now to look at the use period). The one oddball exception to that (under (b)(4)(c)(ii)) is that if you lived in the home for 2 years during the past 5, and held it out as a rental AFTER you move out, that period is still counted as qualified use.

    I mapped this out once about a year ago before selling my residence-turned-rental condo, and determined that it wasn’t worth moving back in to try to recapture a proration of the exclusion amount.

    So let’s assume you lived in the house for 2 years starting January 1, 2009, and then converted it to a rental for 2011, 2012, 2013, 2014, 2015, and then moved back in for 2016 and 2017 and then sold it January 1, 2018, you would have owned it for 9 years total and lived in it for 4. You would be able to exclude 4/9 of $250,000, and that’s it. Better than nothing, but if you’re reaching for the full amount of the capital gains exclusion, it’s not as generous an exclusion as it was before.
    ————————

    i sent that post and blog to my father in law who owns 4 rental properties. he and my mother in law were looking into moving back into one of their rentals in order to save on the cap gains tax with the 2 in 5 year rule, but after i sent him that info he did some research. here’s his take:
    ————————-
    Thanks for pointing out the change, or actual, IRS regs on capital gain profit exclusion on selling rental property. After spending a couple of hours with the IRS Pub 523 last evening, I learned that we would not receive a 500k exclusion, but rather a 21k eligible gain exclusion! Several lessons were learned. In our case, we purchased the home in 1999 and if we moved in in 2016 and lived for 4 years the total years ownership # really throws off the % calculation. Also, after 17 years our depreciation was 76,000 that we had to recapture. The depreciation you have claimed in previous years is very important. Even if you have not claimed it on your prior years tax forms, the IRS says you have to add it into the calculations. My comments are listed below each of your options below, if my understanding of IRS regs are correct .
    ———————-

    dissect away!

  33. 33
    Blurtman says:

    RE: softwarengineer @ 16 – Dow is going to 18,000. Did you bail too soon?

  34. 34
    The Tim says:

    Oops, images in this post were broken. Fixed now. Sorry about that!

  35. 35
    greg says:

    By buford @ 9:

    Some back of napkin math:

    $415,500 – $37,350 (9% to sell) = $377,650
    $377,650 – $350,000 (purchase) = $27,650 net over 4 years

    Property taxes?
    Maintenance?
    Interest on the loan?
    Sounds real close to breaking even to me.
    Better than paying rent I guess, but IMO, not really worth saying “woo-hoo -look at me” over……

    looks to me like the poster either just sold way too cheap or way over paid in 2011. A solid 2011 buy should have a lot more meat on it.

  36. 36
    Boxkicker says:

    RE: greg @ 35

    Thanks Armchair QB!

    I bought the house knowing it was in a great school district (Tahoma) for the 2 youngest to graduate from.

    It was a 4BR/3BA house and at that time I had 3 kids (2 girls/1 boy) living in the house. 1BR/1BA was downstairs and separate from the others so it was good knowing that the son had his own BA and the girls could have their own.

    It had a finished basement where I could get away to have a mancave. Perfect for me.

    It was backed up to the fairway of the 10th hole of the golf course that is the one which didn’t close, and since I love golf it was nice walking 100 yards to the clubhouse and tee off.

    The 2 oldest kids moved out while we were still living there and the youngest was moving out soon as well so the house was going to be too big for just the wife and I.

    But, if you think I overpaid that is okay. It was a great house for me. I used my VA loan so didn’t pay any down payment and I am VA compensable, so I didn’t pay any funding fee as well. The 3.375% APR was nice also!

    I applied for a promotion to Spokane and was offered the job. It was perfect timing for me to move. I wanted to sell quickly and make a little profit. After all my fees, etc…I received a decent check and don’t have to worry about paying rent and mortgage at the same time.

    It is what it is….I just wanted to put my thoughts into the conversation knowing that Maple Valley is still moving up in price.

    Nice knowing you people and following Seattle RE. I no longer have any player in the game so I am out!

  37. 37
    buford says:

    I honestly didn’t know that Tahoma was a good school district. I don’t dispute what you are saying because I don’t know one way or the other.

    I did drive by Tahoma high school at lunchtime about a year ago and I was a little taken aback at the clothing (or lack of) that I saw a large population of the girls wearing there.
    I was rather shocked, and I’m no prude.

    I remember thinking ,as I drove by with mouth agape, that I am glad my teen girl isn’t at that school. Maybe it was just an odd day?????????

  38. 38
    Erik says:

    RE: redmondjp @ 28
    You are angry computer nerds…I get it. Your kind told me I couldn’t do it and I would fail, etc. Then I made a stack of $128k in 2 years and rammed it in your nerd faces. I get that’s why you are mad. I won, you lost. End code.

    Ive watched it again and again on here. The computer crew tries to minimize or dismiss others success.

  39. 39
    kenmorem says:

    erik must be the best troll in the history of the interwebz

  40. 40
    whatsmyname says:

    RE: buford @ 37
    Do you spend a lot of your lunchtimes driving past semi-rural high schools?
    That school is not super close to the road. One wonders how your eyes got so full.
    You’re not from Everett, are you?

  41. 41
    Boxkicker says:

    RE: whatsmyname @ 40

    He was probably gaping at the Covington Pool that is on property next to Tahoma High and thought that was part of the High School.

    Or….

    He means Mt. Tahoma High School which is in Lakewood.

  42. 42
    buford says:

    You got me. I am really Teen Erik from Everett ;-)

    All I know is I saw a Tahoma High School sign and teens walking down the sidewalk wearing very interesting clothing to what looked like what may have been a detached parking lot for the school.
    And I don’t think it was Halloween costumes or swimsuits.
    All I remember is it was on the outskirts of Auburn area.

    But I digress, interesting clothing has nothing to do with the performance of the school district and yes, Tahoma is rated #4 of apprx. 240 state districts.

  43. 43
    buford says:

    By whatsmyname @ 40:

    RE: buford @ 37 That school is not super close to the road. One wonders how your eyes got so full.

    This is the place, right along side of the road.
    https://www.google.com/maps/@47.3870742,-122.1013329,3a,75y,48.55h,83.67t/data=!3m6!1e1!3m4!1s3Jdtra3LII6Nbf4SyUgNrg!2e0!7i13312!8i6656

    Anyways, should get this thing back on topic.

  44. 44
    whatsmyname says:

    RE: buford @ 43 – It does look much closer with a full parking lot and cars on the side of the road. You win that one.

    The thing for me is that boxkicker bought a house that wasn’t ridiculously expensive. It had some pretty good amenities. It appreciated at a decent rate, not “bubble 2.0”. I see a guy who bought a house for living in, and was happy to have done well without needing killer returns when he moved on – in effect, demonstrating something almost every poster on this site claims to want for themselves. Why does he get crap for that?

  45. 45
    buford says:

    By whatsmyname @ 44:

    RE: buford @ 43 – You win that one.

    I wasn’t aware that this was a contest. Hmmm….

    and that is 2012 street view. Just south of that intersection is now a large parking lot for the school too with pedestrian traffic along the road shoulder.

    <Why does he get crap for that?

    Why don’t you direct that at the ones giving him crap. I think he did a pretty good job and I even stated so.

    If it wasn’t clear before, good job Boxkicker and well wishes for your future in Spokane.

  46. 46
    Erik says:

    RE: buford @ 42
    Everett sucks bad. There is no doubt about that after wasting 6 years of my life there. Most cities in the south sound are worse than Everett by a good margin. The dirty south sound is in a different league. North sound people think of north Everett and marysville as worst places, which is true until you get into the dirty south sound. South sound is a whole different story. I live on alki and refuse to move down to the dirty dirty south sound. I’ve lived there. It’s worse than north Everett. Lakewood Washington is the worst place I have lived ever, so I can only imagine what these low life’s offspring at Tahoma high school are like.

    My girlfriend is a dirty south sound girl. I made it clear that I will never ever live down there.

  47. 47
    Erik says:

    RE: kenmorem @ 39
    Thank you. I did punk these programmers in real life though. These stories are all true and part of what drove me to do this was to serve it in these programmers faces. I was pay check to paycheck before. I feel much better after making that profit and getting a real degree from a real school.

  48. 48
    redmondjp says:

    By Erik @ 38:

    RE: redmondjp @ 28
    You are angry computer nerds…I get it. Your kind told me I couldn’t do it and I would fail, etc. Then I made a stack of $128k in 2 years and rammed it in your nerd faces. I get that’s why you are mad. I won, you lost. End code.

    Ive watched it again and again on here. The computer crew tries to minimize or dismiss others success.

    I’m not angry, and I’m definitely not a computer nerd. I do have an almost-paid-off house in a neighborhood where new homes are $1M+. Because I’m smart? No, because I got lucky and bought in an area where a lot of people now want to live. My paper profit is meaningless unless I convert it to an actual gain by selling, which I have no plans of doing right now since my house costs less than it would to rent it and my wife and I both have stable jobs.

    You really should stop assuming and generalizing.

  49. 49
    Erik says:

    RE: redmondjp @ 48
    A bird in the bag is worth 2 in the bush. You should take your million and diversify it. A million dollars is a lot of money. Redmond prices could go down as fast as they went up if the computer places leave. Redmond seems extra bubbly for that reason. I’m happy with the 128k I got. That’s why I bought in Seattle. I don’t think prices will ever really tank in Seattle like they could on the east side.

  50. 50
    Azucar says:

    By kenmorem @ 32:

    RE: buford @ 30

    feel free to pick apart — i would like to know the truth as well. read:
    http://www.financialsamurai.com/invest-in-real-estate-for-capital-appreciation-rental-income-or-lifestyle/#comments

    here’s the post that caught my eye regarding cap gains taxes:
    —————————–
    Well, I hate to be the bearer of bad news, but the rule changed a bit starting January 1, 2009. It used to be that the $250,000/$500,000 exclusion applied so long as you lived in the home for any 24 months of the 5 years preceding sale. Now there’s an exception to the exception to the rule in section 121(b)(4). (Note: it’s the second subparagraph (4) under subsection (b)–apparently the legislature mistakenly enacted two sections called (b)(4).) The IRS chomps away at the $250k/$500k exclusion amount based on a proration of the amount of time that you’ve held the property as a rental since January 1, 2009 (note that it goes back more than 5 years now to look at the use period). The one oddball exception to that (under (b)(4)(c)(ii)) is that if you lived in the home for 2 years during the past 5, and held it out as a rental AFTER you move out, that period is still counted as qualified use.

    I mapped this out once about a year ago before selling my residence-turned-rental condo, and determined that it wasn’t worth moving back in to try to recapture a proration of the exclusion amount.

    So let’s assume you lived in the house for 2 years starting January 1, 2009, and then converted it to a rental for 2011, 2012, 2013, 2014, 2015, and then moved back in for 2016 and 2017 and then sold it January 1, 2018, you would have owned it for 9 years total and lived in it for 4. You would be able to exclude 4/9 of $250,000, and that’s it. Better than nothing, but if you’re reaching for the full amount of the capital gains exclusion, it’s not as generous an exclusion as it was before.
    ————————

    i sent that post and blog to my father in law who owns 4 rental properties. he and my mother in law were looking into moving back into one of their rentals in order to save on the cap gains tax with the 2 in 5 year rule, but after i sent him that info he did some research. here’s his take:
    ————————-
    Thanks for pointing out the change, or actual, IRS regs on capital gain profit exclusion on selling rental property. After spending a couple of hours with the IRS Pub 523 last evening, I learned that we would not receive a 500k exclusion, but rather a 21k eligible gain exclusion! Several lessons were learned. In our case, we purchased the home in 1999 and if we moved in in 2016 and lived for 4 years the total years ownership # really throws off the % calculation. Also, after 17 years our depreciation was 76,000 that we had to recapture. The depreciation you have claimed in previous years is very important. Even if you have not claimed it on your prior years tax forms, the IRS says you have to add it into the calculations. My comments are listed below each of your options below, if my understanding of IRS regs are correct .
    ———————-

    dissect away!

    I have never studied the tax laws in depth, but I looked at them a bit a while back when discussing the subject of the capital gains exclusion for sale of a primary residence with someone in here (software engineer, I think it was?) a few months ago. I don’t own a home of any kind, so I don’t care to try to decipher the laws, but from what I have read I think that the statement in your post above, which said, “So let’s assume you lived in the house for 2 years starting January 1, 2009, and then converted it to a rental for 2011, 2012, 2013, 2014, 2015, and then moved back in for 2016 and 2017 and then sold it January 1, 2018, you would have owned it for 9 years total and lived in it for 4. You would be able to exclude 4/9 of $250,000, and that’s it. Better than nothing, but if you’re reaching for the full amount of the capital gains exclusion, it’s not as generous an exclusion as it was before.” Actually should have said that you can exclude “4/9 of the AMOUNT OF THE CAPITAL GAIN, UP TO A TOTAL OF $250,000 (or $500,000 for married couples)”, rather than “4/9 of $250,000”. 4/9 of $250,000 is $111,111.11… I think that if you bought the house in the above example for $400,000 and are selling it for $500,000 (plus any other gains that you are able to factor out due to transaction costs and any capital improvements, as well as depreciation, I think, that apply), you can’t exclude the whole $100,000 of net capital gain. You can only exclude 4/9 of $100,000 – or $44,444.44.

    The Tim… Maybe this is beyond the scope of what you do in the blog, but since it seems that a lot of people are not clear about the capital gains exclusion (the discussion I was in a month ago was also a good example of someone who wasn’t current on the law mis-stating what it allowed/doesn’t allow), would this be a good topic as a new post? Maybe someone who has recent experience with a capital gain (of a property that they only lived in for a portion of the time that they owned it) has done enough research to be able to shed some light on the intricacies of the law? It sounds like our village id-ten-t, Erik, has gotten it a bit wrong his recent transaction and didn’t do the “pro-rate” thing and also has shared his real identity in here. I wonder if anyone from the IRS reads this blog…. Erik, if you get audited, please let us know what clarification the IRS auditor provided to you about how much you were LEGALLY allowed to have excluded relating to you recent sale of the place that you owned for four years and only used as a primary residence for two years.

    Does anyone besides Erik know the intricacies of the current capital gains exclusion law?

    Clarification: “id-ten-t” is IT Technician/computer programmer code. It is easier to understand if you write it out using numbers instead of the “-ten-“

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