After 33 years and four children, Baby Boomers Marta and Octavian Dragos say they feel trapped in what was once their dream home in El Cerrito, California.
Both over 70, the Dragos are empty nesters, and like many of their generation, they’re trying to figure out how to downsize from their 3,000-square-foot, five-bedroom home.
“We are here in a huge house with no family nearby, trying to make a wise decision, both financially and for our well-being,” said Dragos, a retired teacher.
But selling and downsizing isn’t easy, appealing or even financially advantageous for many homeowners like the Dragos family.
Many Boomers whose homes have surged in value now face massive capital gains tax bills when they sell. This is a kind of tax on the profit you make when selling an investment or an asset, like a home, that has increased in value.
Plus, smaller homes or apartments in the neighborhoods they’ve come to love are rare. And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.
We bought our 1800 sqft house in Sacramento for almost 600k 2 years ago, when it was worth less than half that the last time it was appraised in 2008. We were at least fortunate enough to get a 30 year loan at 3.3% but we will NEVER see property taxes as low as many of our neighbors who have lived there for 20+ years.
My parents are selling their house in a couple of years in order to move closer to us. They’ll easily get over a million for it and then they’ll turn around and use that money to buy a house for 500k in cash. Yeah, they’ll take a hit in taxes but they will still have plenty left for buying the new house outright (so no mortgage), plus doing some additional renovations that my dad wants to do in order to have his dream kitchen.