BG, you’re still assuming that the heirs will want to hang onto these properties, or that they will be able to. Many of these heirs are living paycheck to paycheck, have no savings of their own, and have been waiting for their inheritance so that they can pay off their debts and/or finally buy that car that they’ve been holding off on buying.
In most cases, there’s more than one heir. The kid who’s willing to live in mom and dad’s 1940s bungalow with 1970s green shag carpeting and faux wood paneling probably can’t afford to buy his/her siblings out, especially if he/she is so fixated on the low tax basis.
I only know of two people (my MIL being one of them) who’ve stayed in their parents house by buying out their siblings, and I’m a Southern California native, so I’ve known a LOT of families who’ve been in this situation. All the rest were quick to dump the house so they could divvy up the cash and go about their own lives.
You’re also forgetting about the elderly people who have no savings outside of the house, and when they/the kids want to put them in a home or have them live with one of their kids, so they sell the house to help pay for this.
Again, any money is found money when it comes to inheritance. The heirs are much less likely to be emotionally attached to their parents’ homes, so will sell for whatever the market will bear when they want to sell it, especially since many of these homes have a lot of deferred maintenance and need tens of thousands of dollars (or more) in repairs.
