Recently, the real estate market in Southern California has shown a trend of divergence, with high-priced properties showing signs of pullback. Some properties have seen transactions canceled by buyers backing out after entering escrow, and the market listing period has generally extended. For both homeowners and investors, determining the timing of entry, allocating funds, and planning property succession have become focal points of attention.
KW Commercial’s Director of Business, Jennie Ching, analyzed that in the short term, the Southern California housing market may still face slight downward pressure, especially with a significant increase in bargaining space for high-priced properties. However, she believes that if buyers have long-term holding plans, they can still actively seek suitable targets at this stage. “If it is for living or long-term investment, there is no need to overly wait for the so-called lowest point, as when housing prices decline, the future selling price will also decrease accordingly.”
Jennie Ching introduced that “owner-occupied properties” have many tax benefits, such as a married couple selling their primary residence and living in it for at least two years within the past five years can exempt up to $500,000 in capital gains tax under Section 121 exclusion. For example, if a house is purchased for $500,000 and sold for $1 million, the $500,000 profit can be entirely tax-free.
There is also the “Prop 19” home swap benefit. California Proposition 19 allows homeowners over 55 who meet certain requirements to transfer the assessed value of property taxes from an existing primary residence to a replacement property, saving on property taxes. Jennie Ching gave an example of a 60-year-old homeowner who purchased a house for $300,000 in 1980, which had a market value of $1.2 million upon sale in 2025, with the original property tax assessment value at $730,000. By purchasing a new home for $1.15 million, the old house’s tax base can be transferred to the new home, significantly reducing property tax expenses.
Jennie Ching believes that real estate is not only a popular strategy for accumulating wealth but also has tax advantages rare in renting and other investments. She says, “The key is to understand and flexibly utilize relevant policies.” For instance, homebuyers can make use of the SALT deduction, which allows federal deduction of state and local taxes. Starting in 2025, the limit has been raised from $10,000 to $40,000, with a 1% annual increase.
In terms of home purchase strategies, Jennie Ching recommends emphasizing location, convenience of living, and appreciation potential for homeowners. For commercial or rental investments, attention should be paid to rental return rates, market liquidity, and regulatory restrictions. Additionally, recent changes in California and federal laws may impact tax arrangements for property ownership and succession planning. Investors should consult with professional lawyers and accountants in advance to avoid being caught off guard by policy implementations.
“Whether for living or investing, one should consider their financial structure and future liquidity needs before buying a property,” Jennie Ching said. She emphasized that the real estate market has its cycles, and only by entering within a manageable risk range can one truly achieve stable appreciation and asset succession. ◇