After reflecting about this, I realized that most of the people that have been surprised to learn about this issue have been people who are in the 50-70 year age bracket, and grew up under the previous rules without realizing that they had changed. Prior to the rule change, all of the gains from the sale of a personal home had to be rolled into a new home until a person reached a certain age (can’t remember the age). At that age, the person or couple could sell the home (a one-time deal) without being taxed on the gains. It was assumed that people at retirement age would be downsizing and would need to sell their primary residence before doing so.
Spec builders routinely live in homes that they build, but after this rule changed, many of them began to put one of their new homes in their names and wait two years before selling them. As builders, the sale of spec homes is taxed as ordinary income, but when owner-occupied for two years, the gain is not taxed. After the rule changed, we had customers come to us and specifically explain what they were interested in doing. They were far more interested in having us build a home that was extremely marketable than a home that would satisfy their personal needs for a long period of time. Ironically, some of these people subsequently sold their homes after two years, and made far more money than we did for constructing the homes. LOL