Selling Your Home

Perhaps you are reading the news that single family home sales and prices are strong, and that is making you think that now may be a good time for you to sell your home. Maybe your children have finally moved out, or maybe you are concerned that your two-story home may not work for you as you get older. Maybe you are cash-poor and house-rich and want to monetize all you have built over the years and live a more simple life in a smaller home. All of these are good reasons to think about selling your home. The problem is, there are a lot of other issues that you need to consider before making the decision to list your home. Let’s consider some of these issues.

Home For Sale Real Estate Sign and Beautiful New House.

Where Are You Going To Live?

Most people need to sell their current home in order to buy another home. If your case is different, then hat’s off to you. In a seller’s market such as this, selling is the easier part. Buying a new home may be the harder part now, especially if you are looking to live in a desirable market with a paucity of housing supply. Stories abound now of listings receiving multiple offers including offers above asking price. Until you have experienced being outbid on a house you really want, you may not be battle-hardened enough to go the extra mile on a bid so that you win. You may find yourself in a situation wherein you have sold your house but have no place to move to because you weren’t successful in purchasing what you want. Keep in mind, if you are selling a less-expensive house and hoping to move to a more-expensive area or house, you are a net buyer, not a net seller, and so your focus should be on the purchase side rather than the sale side in a hot market such as this. If instead you are downsizing or moving away from the hot market, then your situation may be different. Nevertheless, consider whether the sale of your existing home or the purchase of the new home will be the tougher part of the transaction, and make sure you have the tougher side covered before addressing the easier side. Don’t find yourself having to bridge a gap by having to move in with your parents or your children or into rental housing because all of those add to the cost and to the annoyance factor of the move.

Capital Gains Taxes

If you sell your house for more than you paid for it plus what you have put into it, then you incur a capital gain, which is taxable. Therefore, all of the equity that you pull out of your current house may not be available to you for a down payment on the new house. Fortunately, the IRS does provide relief for this. When you sell your house, you can exclude up to $250,000 of capital gains from being subject to capital gains tax – and up to $500,000 if you are married filing jointly. You need to have lived in your house as your primary residence for at least 2 of the 5 years prior to selling the house to qualify for the capital gains exclusion, and you can still qualify for at least a partial exclusion if you have extenuating circumstances such as death, divorce, military service, or job relocation. For most people in most housing markets, these exclusions are sufficient to cover their capital gains, but in some markets and where people have owned their current house for a long time, they may not be able to exclude all of their capital gains. Consult your tax expert with your specific situation before moving forward under any assumption that you can exclude part or all of your capital gains. Make sure you have a record of money you have put into your house that might have added to its basis and therefore would work to minimize any capital gains taxes.

New Property Taxes

Some states, such as California with Proposition 13, have caps on how much their property taxes can be raised each year. If you live in such a state and your home has appreciated in value during the years you have lived there, your current property taxes may be artificially low. If so, when you buy your new house, your new property tax bill will be based on what you paid for the new house, meaning you could pay a lot more in property taxes on the new house than you did on the prior house. Now, California also has a law that allows some people (Seniors) to purchase a new property within their current County (plus some but not all other Counties) and retain their old tax basis. However, absent such a provision in your state, you may be faced with a much higher property tax bill when you buy a new house.

Other Issues

Do you really want to move into a new house and start again from Square One with respect to your social and community life? Are there so many memories tied up in your existing house that you can’t bear to leave? Does the thought of moving horrify you? It may be too much for some people, but for others, perhaps those seeking to be closer to medical care or to grandchildren or other family members, such change may be desirable. Such non-financial issues are certainly valid issues related to the decision of whether or not to sell your home.


A lot of people look at these and other issues and decide it isn’t worth it to sell their current home, even in such a hot seller’s market. This is one of the reasons that demand far outstrips supply and that you have multiple offer situations with some listings. Yet, the hot market is tempting, and the market should remain strong as long as the supply/demand equation remains tilted as it currently is and as long as mortgage rates remain relatively low. Talk with tax experts and consider your own situation before making the big decision of whether to sell your house now or not.


For most of the past 13 months of stock market rally, I and others have written about our concern that the rally is being propelled by a very few number of stocks, particularly by those mega-cap companies that have benefitted through the economic shutdown caused by the Pandemic. In short, the rally has been strong but not very broad. According to this article in Monday’s Wall Street Journal, that seems to be changing. More and more stocks are participating in the current rally, and that is a good thing if you are looking for a sign that the current rally has legs. (Today’s down action notwithstanding).

200-Day Moving Average

The WSJ article says that the current rally is broad because 95% of all stocks are trading above their 200-Day moving average, a situation that hasn’t happened since 2009, also the first year after a market correction. 200 days is about 40 weeks of trading, and if 95% of stocks are on a 40 week uptrend, then that is indeed evidence of a broad market rally. The 200-Day is considered to be more indicative of a stock’s long-term direction as has more data points than shorter-term indicators such as the 50-Day.

Stay At Home Stocks

This has not been a straight-up rally for the entire breadth of the stock market, and it remains lopsided with the mega-cap stocks carrying the bulk of the load. However, as more people get vaccinated and more aspects of the economy reopen, companies and stocks that had trouble during the worst of the pandemic begin to show life again and investors continue to look for opportunity. Interest rates remain low and therefore returns in the fixed income sector still aren’t there, and so investors continue to invest in stocks rather than bonds. It seems like a situation wherein the mega-caps have led the way and the rest of the stock market universe is now following along.


I have been very concerned for the past year about the lack of market breadth. We’re not out of the woods yet, but if 95% of stocks are above their 200 Day MA, then that is a good sign that there is true breadth, and that an issue with one of the mega-cap stocks won’t cause the entire house of cards to tumble down.

For Yourselves or For Your Children?

Is one of your financial objectives to leave some inheritance for your children and/or your remaining family? Or are you hoping to spend it all during your own lifetime, enjoy the fruits of your labor and your personal planning, and die with $0 in the bank but owing nothing to anyone? The answer to that may depend on how much money you have to begin with. It is a nice, generous thought to believe that you can leave an estate to your children, but most people don’t have that luxury because they are living paycheck to paycheck and fighting to keep afloat during their own lifetimes. For most people, the legacy they leave to their children is the love that they give them and the money that they spend to feed, raise, and educate them when they are still children. They couldn’t afford to do much else when their children are younger, and they likely won’t be able to afford to provide more for their children upon their death. For most people, Social Security is a very important part of their retirement income, and whatever personal savings they might have they spend themselves, hopefully in some orderly fashion that will leave them still with some money even if they live to a very old age.

Planning to Leave an Inheritance

However, if you are lucky enough to be among the few who already have enough money to live comfortably during retirement and will likely have something left over to leave to their children, you will likely have a different plan both for investing and for your rate of spending your savings during retirement. For instance, if you are not planning to leave an inheritance, something like the 4% Rule should be part of your plan. Withdraw 4% +/- of your net worth every year and hope your money lasts long enough. If you instead are trying to leave something to your kids, then you shouldn’t think about how much of your net worth you can withdraw each year. Instead, you should invest such that you can generate enough current income from your portfolio to live on comfortably during retirement without having to draw on the principal. Easier said than done in this day and age because current income is hard to come by with interest rates as low as they are. It may mean you consider investing in alternative asset classes that pay current income, such as real estate or oil and gas partnerships. You should invest also in traditional income-generating assets such as stocks that pay dividends, preferred stocks, or corporate or mortgage-backed bonds or mortgage REIT’s. All of these pay current interest or dividends but are further out on the risk spectrum than are traditional bonds.

Step-Up In Basis

Another part of the “Inheritance” plan is to own assets for a long time, preferably several years. Hopefully these assets will appreciate in value during that time. If they do, when you pass away, your heirs receive a step-up in basis. This means that your heirs’ tax basis in these assets will be the market value of those assets at the time the heirs became the owners. This is a significant tax advantage to them because they could sell these assets for whatever reason and not incur a capital gains liability. Direct ownership of real estate works well in this regard.

Another Option

Another option to consider is my strategy to own index funds and to write call options against them for current income. Depending on how much you have and are willing to dedicate to this strategy, if you just withdraw the amount of income that you generate from the call option writing (or less), then you may be able to live comfortably during retirement without having to withdraw any of your principal, and therefore you should be able to leave something to your children. This strategy doesn’t work as well if you are trying to leave your heirs with assets at a low basis because of the likelihood that your assets will be called away from you from time to time, necessitating that you re-buy them in order to keep the strategy going. Please contact me with further questions about this option.


What you want to have done with your assets when you pass away, assuming you have any assets at that time, will dictate how you invest those assets during your lifetime. If you have enough money to live comfortably during retirement and you have a desire to leave something to your heirs, then you should think about investing long-term and about making sure your assets generate current income for your own needs. Otherwise you may die with $0 in the bank even if that wasn’t your intent.

Beware Of Their Agenda

While scrolling through LinkedIn, I saw a recent quote by billionaire Sam Zell to the effect that working in a traditional office will make a comeback because creativity and motivation are not easily fostered by working remotely through Zoom. Of course Sam Zell would say that, I thought. Sam Zell is the head of Equity Office Properties, one of the largest developers and owners of office towers in the US. It’s not news that Sam Zell said he believes offices will make a comeback; it would have been news had he made the opposite statement.

Sam Zell, CEO of Equity Office Propertis

They All Have An Agenda

Sam Zell’s statement is self-serving. More people in offices means more tenants which means higher office rents which means more money in Sam’s pocket. Yet Sam’s statement is consistent with what you see and hear from the talking heads in financial and social media. All of these people are self-promoters with an agenda, which is to put more money into their own pockets. Not that there is anything wrong with that. Every business person is trying to make more money and their statements and actions reflect that motivation.

Think Critically

You can think of all forms of media and sources of information as a forum for conflicting ideas, and it is up to each person to think critically and decide who to believe and who not to believe. The ability to think critically is the key. Just as Sam Zell promotes a return to traditional offices, I’m sure that a statement from the CEO of Zoom (Eric Yuan) would be to the effect that the era of traditional offices is over and that business henceforth will be conducted primarily remotely using platforms such as Zoom. Which statement do you believe? You have to decide for yourself by looking at the data. Same for any situation where you have competing points of view. All of these people are in the game to make more money for themselves, and so are you. Use your best judgement, make your choice, and hope for the best. That is our gift as human beings.


I am not picking on Sam Zell here. I read his quote and thought there was something universal about it and its context, so I thought I would write about it. My point is to be skeptical about self-promoters; i.e., almost everyone who is quoted in any form of media. Skeptical not in a bad way or that they are bad people, but to understand that they have an agenda to promote which is probably different than your own agenda. Understand this and it will give you perspective on what you need to do to achieve your own goals.

Are Investors Getting Complacent?

As of this morning, the VIX Index, aka the Fear Index, is hovering at around 18, which is the lowest it has been since pre-Covid. The Equity Put/Call Ratio is low, at around 0.74, which is below its 200 Day moving average of about 0.8. The stock market is “melting up”, with the S&P 500 at an all-time record high and the Nasdaq 100 Index up over 1% today and only about 5% off its record high after a sell-off from mid-February into early March. The $1.9 Trillion American Rescue Plan stimulus bill has been signed, and now President Biden has proposed another $2.3 Trillion to be spent on “infrastructure”, although details of the bill suggest otherwise. The rising stock market suggests that investors believe the upsides of all of this government spending will outweigh the downsides and that corporate earnings will rise, and so investors are buying stocks. Do you believe investors are showing their complacency in this view?

Inflation: The Danger

The big risk with all of this government spending is that inflation will rise and that the dollars that people have will be worth less in the future due to this inflation. Higher inflation means higher interest rates, and though the Treasury market has stabilized for the time being, rates will rise if indicators show that the inflation risk is elevated. It was a rise in rates across the yield curve that caused the mini-correction that we had, especially in the Nasdaq 100 Index, during February and early March. Look for another mini-correction in the stock market if rates move up again, even by another 10 basis points. For instance, if the 10 Year US Treasury Yield rises from its current level of about 1.68% to 1.8%, a rate that it hasn’t hit since pre-Covid, look for stocks to sell off again, with high-multiple Nasdaq 100 stocks being the most vulnerable.

Are Investors Really Complacent?

Though the readings on the VIX, Put/Call Ratio, and the record or near-record levels of the big stock indexes might suggest that investors may be complacent and may not be heeding the risks of higher inflation and higher interest rates, I’m not so sure that the readings show complacency. True, the VIX Index is lower than it has been in over a year, but before Covid, the VIX seldom broke above 20 for the prior 4 years. True, the 10 Year Treasury Yield is up, but its yield was north of 2% as recently as July 2019 and for most of the 3 years prior to then as well. Perhaps the low Put/Call ratio and the “melt-up” in stock prices doesn’t reflect complacency as much as it reflects investor optimism that our nation and our economy are finally returning to “normal” after the Covid period.


I believe the key will be the rate at which inflation will rise. Watch things closely here. If most of the supply chain issues can be addressed and the rise in inflation can be kept in check, then current investor optimism will have been justified. However, if the stimulus spending coincides with an economy that struggles to emerge from supply chain bottlenecks and other international issues, then the bet may have been misplaced. My guess is that inflation will rise to perhaps the mid-2%’s, but that will be manageable and we will make it work. “Be skeptical when others are greedy” is a good thought to keep in mind at this point.