Tag: Home Sales

Could Capital Gains Tax Cuts on Home Sales Spark a Real Estate Revival for Small-Cap Investors?

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Trump says his administration is exploring the removal of capital gains taxes on home sales.
– The move could unlock capital, boost housing turnover, and benefit housing-related sectors.
– Middle-market and small-cap real estate and home improvement firms could see upside from rising transaction activity.

In a surprising policy hint that could reshape the U.S. housing market, President Donald Trump said Tuesday his administration is “thinking about no tax on capital gains on houses.” The statement, delivered from the Oval Office, comes as part of a broader economic playbook aimed at fueling consumer momentum ahead of the 2026 election cycle.

Currently, profits from home sales are subject to capital gains taxes, though homeowners selling their primary residences can deduct up to $250,000 (single) or $500,000 (married) under existing law. Trump’s proposal — which aligns with a new bill introduced by Rep. Marjorie Taylor Greene — would eliminate capital gains tax altogether on home sales, potentially removing one of the biggest friction points in residential real estate.

For investors — particularly in the middle market and small-cap sectors — the implications could be significant.

Removing capital gains tax on homes could encourage long-time homeowners to sell, freeing up inventory in tight markets and fueling demand for adjacent sectors: real estate brokerages, mortgage services, homebuilders, renovation companies, and material suppliers. Small-cap firms in these industries, which have lagged amid high interest rates and a sluggish housing turnover rate, may find themselves back in favor.

The policy could also revive investor sentiment in the residential property space. With more liquidity available and tax incentives restored, buyers may re-enter the market more aggressively, especially if paired with a future Fed rate cut — something Trump alluded to when he said, “If the Fed would lower the rates, we wouldn’t even have to do that.”

From a strategic standpoint, eliminating taxes on home sales would shift housing from being just a lifestyle decision to a more liquid investment vehicle — benefiting not only homeowners but potentially boosting real estate stocks, REITs, and companies supporting the housing ecosystem.

Critics argue such a move could overheat the housing market or primarily benefit wealthier Americans. However, for investors with an eye on undervalued small-cap plays, this policy could be the catalyst that reopens stalled growth pipelines in sectors tied to home transactions — particularly construction, hardware, lending tech, and residential services.

It also ties into a broader trend: a return to asset-based investing over speculative tech — with hard assets like homes, precious metals, and infrastructure increasingly seen as reliable anchors during fiscal uncertainty.

While the proposal is far from finalized, the conversation alone signals that real estate is back on the national economic agenda — and may offer renewed upside for investors willing to look beyond the large caps.

Pending Home Sales Plunge to Lowest Levels in Over 20 Years

Posted on by slightbourne@noblecapitalmarkets.com

Pending home sales in the U.S. unexpectedly plunged in October to their lowest levels since record-keeping began over two decades ago, even below readings seen during the housing crisis in 2008.

The National Association of Realtors (NAR) reported Thursday that its index of pending sales contracts signed on existing homes retreated 1.5% from September. On an annual basis, signings were a staggering 8.5% lower than the same month last year.

October’s reading marks a continuation of the housing market’s steep slide over the past year from blistering pandemic-era sales levels as mortgage rates rocket higher in the most dramatic housing finance shake-up in decades.

“Recent weeks’ successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied,” said NAR Chief Economist Lawrence Yun.

Spike in Mortgage Rates Strangles Demand

The October pending home sales data reflects buyer activity when popular 30-year fixed mortgage rates shot up above 8% in mid-October before settling back around 7% in more recent weeks.

Skyrocketing borrowing costs over the past year have rapidly depleted home shoppers’ budgets and purchasing power, squeezing huge numbers of Americans out of the market entirely and forcing others to downgrade to lower price points.

With the average rate on a 30-year fixed loan more than double year-ago levels despite the recent retreat, still-high financing costs in tandem with stubbornly elevated home prices continue dampening affordability and sales.

All U.S. regions saw contract signings decline on a monthly basis in October except the Northeast. The Western market, where homes are typically the nation’s most expensive, recorded the largest monthly drop.

Pending transactions fell across all price tiers below $500,000 while rising for homes above that threshold. The shift partly reflects moderately improving supply conditions on the high end, even as demand rapidly recedes at lower price points.

Home Prices Still Climbing for Now

Even against shrinking demand, exceedingly tight inventories of homes listed for sale have so far prevented any meaningful cooling in the torrid home price appreciation that’s stretched affordability near the breaking point for many buyers.

The median existing home sales price rose 6.6% on the year in October to $379,100. While marking a slowdown from mid-2021, when prices were soaring 20% annually, it still represents an acceleration over the 5.7% rate seen last October.

With few homes hitting the market, bidding wars continue breaking out for even modest starter homes in many areas. In such seller-favorable conditions, a plunge in overall sales does little to crimp further rapid home value growth.

Leading indicators suggest home prices likely still have further to climb before lackluster sales and eroding affordability force more substantive cooling. But shifts in home values and sales usually lag moves in rates and mortgage activity by several months.

“The significant decline in pending sales suggests…further weakness in closed existing home sales in upcoming months,” said Swiss bank UBS economist Jonathan Woloshin.

With mortgage activity plunging to a quarter-century low, actual completed sales are widely expected to continue deteriorating into early next year or beyond as the pipe of signed deals still working through the market keeps drying up.

Path Ahead for Housing Market

Most economists expect home sales will likely continue slumping over the next six months or so until lower financing costs combined with a slow improving inventory offer some stability.

“We think housing activity has little prospect of bottoming out until spring 2024, at the earliest,” said Nancy Vanden Houten of Oxford Economics. She projects existing home sales will fall nearly 25% in 2024 from current-year levels.

Other analysts say still-strong demographics and a solid job market should prevent an all-out housing collapse, but that robust spring and summer recovery rallies like those seen earlier this century are unlikely in coming years.

Instead, as mortgage rates settle somewhere above 6% and homes trickle back on the market, sales activity should slowly stabilize around 10-15% below 2018-2019 levels through 2024 and beyond – marking a ‘new normal’ after ultra-hot pandemic conditions.

“I expect mortgage rates to moderate…helping home sales firm up a bit, but still remain below pre-pandemic activity,” said Yun. With fresh records signaling just how devastating this year’s rate spike proved for buyers, Yun expects the spring thaw in housing demand could come slower next year than markets anticipate.