Alleging that house flipping is preventing average people from buying a home , a California Assembly member had proposed a law that would require shortterm real estate investors to pay a 25 % gain tax , according to CBS 8 .
If it had passed , the California Housing Speculation Act would have started on January 1 , 2023 . The Assembly member behind the bill is Democrat Chris Ward from San Diego County ’ s 78th District . There is an “ influx of shortterm investors trying to get into the market , outbid San Diegans and Californians with allcash offers , and drive the prices up for everyone ,” Ward told CBS 8 .
The Assembly member also cited concerns with California housing shortages making it difficult for people to find affordable housing .
Norm Miller , a real estate professor at the University of California , San Diego , said that even if the law would have passed the odds would still favorable for real estate investors .
Investors will still get “ unlimited tax write offs from the mortgage interest and the property taxes ,” Miller said .
“[ They ’ ll ] also get depreciation , which is something an owner does not get on their own personal residence .”
The real estate marked has changed quickly and drastically in a mere few months due in part to continued interest rates hikes . In fact , Federal Reserve raised rates seven times in 2022 , according to Taylor Tepper , staff member with Forbes Advisor .
Four of those times were supersized 0.75 percentage point increments in an effort to bring down inflation .
The properties that were once receiving overasking , multiple cash offers just eight months ago are now stagnate , many already with multiple price reductions , according to several real estate agents interviewed for this article .
Included in the slowdown is the exit of numerous financial experts and mortgage companies . ( A list of companies affected in 2022 ' s fourth fiscal quarter is listed below *.)
While the Federal Reserve ' s goal of curbing inflation is causing the real estate sector , on the whole , to take a negative hit . The shifting market is also creating opportunities for those investors who have been able and ready to purchase , but couldn ' t because of fierce competition from allcash buyers .
" We have to remember that the market we were in before was not normal ," said Rusty Tweed , CEO of TFS Properties at Realty411 ' s Investor Summit in Santa Barbara in late January 2023 . He explained that if we look at the real estate market from a historical viewpoint , interest rates are still at a fantastic level .
It seems now that the buying frenzy has tapered off , the market can bounce back on more solid ground and prepare for a more sustainable future . residence .”
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