Thanks @Querty! Great stuff here!

I view the $127,875 not as 5.1% of the sales price, but 12.8% of your $1m profits!

The net from sale, assuming the mortgage is paid down to $875,000 would be $872,125 ($1.125m equity from sale, less closing costs - $125,000 and taxes - $127,875 equals $872,125)

A $2.5m home with $875k down is a loan of $1,625,000. If jumbo rates are 6.875% the mortgage only payment is $10,675. Not all that attractive of a monthly nut and a detriment to selling. Assuming both Fed and California taxes are mitigated through a change of investment taxation law, the down payment increases to $988,600. This changes the monthly to $9,932. Still a big leap, but sub $10k which for many is a psychological bridge too far.

The original mortgage of $1m at 3.0% was a payment of $4,216, so in any scenario a seller today would see more than a doubling of their mortgage nut.

Bear in mind many 2019 vintage homes priced at $1.5m were 3/3 or 4/3 SFR condos with zero lot lines. Many $2.5m Irvine homes this seller would be buying up to are 4/4 to 5/5 SFR's which have a higher quality of life level IMHO for example:

https://www.redfin.com/CA/Irvine/22-Maywood-92602/home/5772782
So, a Seller might be tempted to make the leap from a $4,200 mortgage to a $9,900 mortgage if SF, location, property type etc made sense. When rates come down from 6.875 to 3.875 that shaves $2,800 off of their loan payments and is a

__reasonably possible__ scenario. If a seller waited for a 3.875% rate before they sell, and if they didn't get the kind of tax breaks we're discussing, who knows what type of property would be available.... It's possible as well that the seller would rent for $6-7k per month and invest that $988k into BTC, Gold, Tesla (name your own hot-button investment scheme here) and wait to see what will happen over the next 2-3 years. Cash, as we know, is King.

Something to chew on as everyone wants to know how we can get more inventory to market.