Could a Capital Gains “Fix” Be the Housing Market’s Missing Ingredient?

If you’ve been keeping even one eye on the U.S. housing market lately, especially on the higher end, you’ve probably noticed something odd. Prices are high, sure. But that’s not the whole story.

What really stands out is how few people are selling. And the more I dig into it, the more I keep circling back to one surprisingly boring but powerful culprit: capital gains taxes.

Not exactly cocktail party talk, I know. But stick with me.

The Tax Rule That Kind of… Froze in Time

Here’s the deal. If you sell your primary home, the federal government lets you exclude up to $250,000 in profit if you’re single, or $500,000 if you’re married filing jointly. Sounds generous, right?

It was.

In the late 1990s.

The problem is that those numbers haven’t budged in decades, while home prices absolutely have. Especially in desirable areas. Especially for people who bought years ago and just stayed put.

So now you’ve got homeowners sitting on gains that blow past those limits. And suddenly, selling your house doesn’t just mean packing boxes and finding a new place. It means writing a very real check to the IRS.

If I were in that position, I’d hesitate too.

Why People Aren’t Moving, Even When They Want To

This is where the “lock-in effect” comes in. Basically, if moving triggers a big tax bill, people don’t move. Even if the house is too big. Even if the kids are gone. Even if they’d love something different.

I think about a couple I know who’ve talked for years about downsizing. Every holiday, same conversation. “Next year, maybe.” Then they run the numbers. And… nope. They stay.

Multiply that by thousands of homeowners, and you get today’s inventory problem.

Fewer listings mean more competition. More competition keeps prices high. And suddenly the market feels tight, not because nobody wants to sell, but because selling is financially painful.

Could a Policy Change Actually Help?

This is where things get interesting. There’s growing chatter in Washington about updating capital gains rules for primary residences. Some ideas are pretty bold, like eliminating the tax entirely. Others are more measured, like raising the exclusion or indexing it to inflation or home prices.

The argument is simple. If homeowners aren’t punished for selling, more of them will sell.

More homes on the market means more choices. More balance. Less of that frantic, “we lost again” feeling buyers keep talking about.

It wouldn’t magically make homes cheap overnight. But it could get the market moving again.

Why Kansas City Should Care

In Kansas City’s higher price ranges, this isn’t theoretical. It’s already happening. Longtime owners in established neighborhoods have seen serious appreciation. Great for net worth. Tricky when it’s time to move.

For sellers, tax reform could mean flexibility. Downsizing without regret. Moving without feeling like you’re giving up a chunk of your equity.

For buyers, especially above $600,000, it could mean more listings and less pressure. More breathing room. More options.

That sounds pretty healthy, honestly.

Why This Moment Matters

Right now, everything is colliding. Interest rates. Affordability. Supply. And tax policy might be the quiet lever that determines how stuck or fluid the market becomes over the next few years.

I didn’t expect to get this fascinated by capital gains taxes, but here we are. Turns out they’re not just an accounting footnote. They shape real behavior. Real decisions. Real lives.

Bottom line: Capital gains policy quietly influences when people sell, or don’t. And for anyone buying or selling in Kansas City’s premium market, it’s a conversation worth watching closely as housing policy continues to evolve.