OK, here's the law: It's $250,000 per spouse, with a residency requirement of two years out of the last five. You can theoretically use it every two years, as long as you occupy the property as your primary residence the whole time. The old rule was that you could use the exemption only once in a lifetime, but you also had the Rollover Replacement Rule which allowed you to sell your appreciated primary residence, buy a replacement of equal or higher value, and pay no capital gains tax. They took that away...which is bad.
"They took that away...which is bad."
I can't help but wonder if this has caused a lot of "churn" in the higher appreciation markets, with people cashing in their appreciation equity as soon as the two out of five years has elapsed, and that appreciation approaches the $250K (for singles) or $500K (for married couples) limit.
Then, they go looking for another one, flush with cash, which reinforces the high appreciation cycle, and repeat the process again after two years.
Plausible?