What % of net worth is your home?

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financial.freedom
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What % of net worth is your home?

Post by financial.freedom »

I'm sure this question will depend on a lot of factors, for instance:

1. HCOL area might have a higher % than someone in LCOL area.

2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.

The reason I ask is that we could have a wide range. We are young, could put everything into our "forever home" depleting taxable VG accounts, savings accounts etc. Or, we could buy a "for now" home that is less expensive and would be a good place for 5-10 years. We could take out a 15-year mortgage on this home, build more equity and then buy our "forever" home in 5-10 years. Or we could keep renting...

I'd like to compare the range we are looking at to what others have done on this forum. Thank you for the feedback!

Edit: I'm leaving it open as to how to determine the value, because I think that provides insight. Maybe listing both equity and total market value (rough value that your home would be listed on Zillow etc.) would be helpful. I think one's age is also helpful.
Last edited by financial.freedom on Mon Dec 22, 2014 7:55 pm, edited 2 times in total.
jchris
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Re: What % of net worth is your home?

Post by jchris »

If you mean what percentage of my net worth is home equity, the answer for me is - about 18%.

If you mean is the ratio of the total value of the home to net worth, the answer is - about 26%. I think the first one is more meaningful.
KlangFool
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Re: What % of net worth is your home?

Post by KlangFool »

financial.freedom wrote:I'm sure this question will depend on a lot of factors, for instance:

1. HCOL area might have a higher % than someone in LCOL area.

2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.

The reason I ask is that we could have a wide range. We are young, could put everything into our "forever home" depleting taxable VG accounts, savings accounts etc. Or, we could buy a "for now" home that is less expensive and would be a good place for 5-10 years. We could take out a 15-year mortgage on this home, build more equity and then buy our "forever" home in 5-10 years. Or we could keep renting...

I'd like to compare the range we are looking at to what others have done on this forum. Thank you for the feedback!
financial.freedom,

1) I do not consider my house as part of my net worth to begin with.

2) How do you calculate the value of the house?? Take market value minus outstanding mortgage??

In my opinion, if you have to consider house as part of your net worth, you are buying too much house.

<<1. HCOL area might have a higher % than someone in LCOL area.>>

Why buy? Rent instead.

<< 2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.>>

Bad idea.. You are paying interest to the bank. Unless it is cheaper to buy versus renting, you will very likely never get around in building a nest egg.

It is a house. It is not a home.

KlangFool
bigred77
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Re: What % of net worth is your home?

Post by bigred77 »

Home equity % of networth is about 40%

Home value as a percentage of networth is about 180%

Still a few more months left of being a 20 something...
stan1
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Re: What % of net worth is your home?

Post by stan1 »

I know many people do it, but I don't think it makes a lot of sense to buy a home and sell it after 5-10 years (unless you did so in 1992 or 2009 and through skill or luck timed the market well). The reason is transaction costs (commissions, closing costs, fixing up your old house to sell it, fixing up and furnishing the new house as you like it).

If you have a clear vision of what your "forever" house is, a way to get there in 5 years (10 starts to be a longer time), and don't mind renting I think I'd pass on a "starter house" for this reason.
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Toons
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Re: What % of net worth is your home?

Post by Toons »

6% :happy
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tennisplyr
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Re: What % of net worth is your home?

Post by tennisplyr »

Bought my house 33 years ago--it represents 50% of my net worth. It's become a nice investment for me at 65 years of age and retires.
Those who move forward with a happy spirit will find that things always work out.
Topic Author
financial.freedom
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Re: What % of net worth is your home?

Post by financial.freedom »

jchris wrote:If you mean what percentage of my net worth is home equity, the answer for me is - about 18%.

If you mean is the ratio of the total value of the home to net worth, the answer is - about 26%. I think the first one is more meaningful.
Thank you, I think both numbers are helpful. I think one's age is also helpful. FWIW, we are mid-30s.
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Ged
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Re: What % of net worth is your home?

Post by Ged »

stan1 wrote: The reason is transaction costs (commissions, closing costs, fixing up your old house to sell it, fixing up and furnishing the new house as you like it).
If you start getting over $250K appreciation then taxation on the cap gains could be a motivation.
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Cosmo
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Re: What % of net worth is your home?

Post by Cosmo »

financial.freedom wrote:I'm sure this question will depend on a lot of factors, for instance:

1. HCOL area might have a higher % than someone in LCOL area.

2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.

The reason I ask is that we could have a wide range. We are young, could put everything into our "forever home" depleting taxable VG accounts, savings accounts etc. Or, we could buy a "for now" home that is less expensive and would be a good place for 5-10 years. We could take out a 15-year mortgage on this home, build more equity and then buy our "forever" home in 5-10 years. Or we could keep renting...

I'd like to compare the range we are looking at to what others have done on this forum. Thank you for the feedback!

Edit: I'm leaving it open as to how to determine the value, because I think that provides insight. Maybe listing both equity and total market value (rough value that your home would be listed on Zillow etc.) would be helpful. I think one's age is also helpful.
Our home market value is roughly 25% of our net worth.

Cosmo
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Cosmo
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Re: What % of net worth is your home?

Post by Cosmo »

KlangFool wrote:
financial.freedom wrote:I'm sure this question will depend on a lot of factors, for instance:

1. HCOL area might have a higher % than someone in LCOL area.

2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.

The reason I ask is that we could have a wide range. We are young, could put everything into our "forever home" depleting taxable VG accounts, savings accounts etc. Or, we could buy a "for now" home that is less expensive and would be a good place for 5-10 years. We could take out a 15-year mortgage on this home, build more equity and then buy our "forever" home in 5-10 years. Or we could keep renting...

I'd like to compare the range we are looking at to what others have done on this forum. Thank you for the feedback!
financial.freedom,

1) I do not consider my house as part of my net worth to begin with.

2) How do you calculate the value of the house?? Take market value minus outstanding mortgage??

In my opinion, if you have to consider house as part of your net worth, you are buying too much house.

<<1. HCOL area might have a higher % than someone in LCOL area.>>

Why buy? Rent instead.

<< 2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.>>

Bad idea.. You are paying interest to the bank. Unless it is cheaper to buy versus renting, you will very likely never get around in building a nest egg.

It is a house. It is not a home.

KlangFool
Klangfool,

I do not believe the OP was asking whether or not your home should be a part of your net worth or that it is bad to buy in a HCOL area or that it is a bad idea for a younger person to focus on buying a home versus building up a net egg. If you don't agree with his question, then why bother responding?
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Aptenodytes
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Re: What % of net worth is your home?

Post by Aptenodytes »

56 45% 27%
The middle one is pure math -- doesn't really mean anything substantively, does it?
terpfan122
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Re: What % of net worth is your home?

Post by terpfan122 »

0% yes, I am a homeowner
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Wildebeest
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Re: What % of net worth is your home?

Post by Wildebeest »

HCOL area. We are in our late 50's. Our house is much too big for us and for many years we did not have enough money to put furniture in all the rooms.

For many years my spouse felt our house was too big and pretentious. Now most of our acquaintances live in similar houses ( 25 years later) . I had built it for resale and I am not willing to sell to be confronted that it has been our worst investment.

I should rephrase it: "At the time I thought it was our road to financial security and now I realize it was an ego trip, which had a 0 % return".

Go to the NYT calculator. Your home is not an investment, it is a place to live.

We were very fortunate that other business ventures worked out better.
The Golden Rule: One should treat others as one would like others to treat oneself.
MathWizard
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Re: What % of net worth is your home?

Post by MathWizard »

12%. Home equity to net worth

Home nearly paid off
MathWizard
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Re: What % of net worth is your home?

Post by MathWizard »

terpfan122 wrote:0% yes, I am a homeowner
Is your home worth zero or do you have
infinite net worth?
PS241
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Re: What % of net worth is your home?

Post by PS241 »

I want to point out mid-thirties is old! :twisted:

Mid twenties equity to nw 12%

Total to nw: 200%

House poor? :oops:
lolbatross
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Re: What % of net worth is your home?

Post by lolbatross »

12% - home equity / net worth.

Alternatively it represents like 98% of our liability.
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Steelersfan
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Re: What % of net worth is your home?

Post by Steelersfan »

Toons wrote:6% :happy
+1

:happy :happy

It's good to live a simple life as a retired empty nester.
wahnfried
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Re: What % of net worth is your home?

Post by wahnfried »

6.8% , home is paid off :happy
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Re: What % of net worth is your home?

Post by fanmail »

Wildebeest wrote:I should rephrase it: "At the time I thought it was our road to financial security and now I realize it was an ego trip, which had a 0 % return".
wow that is a great line
fposte
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Re: What % of net worth is your home?

Post by fposte »

Age is fiftyish, home equity is approximately 6%, home value approximately 10%--LCOL area.
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joe8d
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Re: What % of net worth is your home?

Post by joe8d »

3%.Paid cash for condo.
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stan1
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Re: What % of net worth is your home?

Post by stan1 »

Ged wrote:
stan1 wrote: The reason is transaction costs (commissions, closing costs, fixing up your old house to sell it, fixing up and furnishing the new house as you like it).
If you start getting over $250K appreciation then taxation on the cap gains could be a motivation.
Yes, that's not OP's situation, but it is a consideration for people in that situation ($500K in gains if married). Keep track of cost basis and improvements.
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Peter Foley
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Re: What % of net worth is your home?

Post by Peter Foley »

Medium cost of living area. We are retired and own our home free and clear. It is about 12% to 15% of our net worth.
stonerolled
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Re: What % of net worth is your home?

Post by stonerolled »

20-25%, house is paid for.
Ron Ronnerson
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Re: What % of net worth is your home?

Post by Ron Ronnerson »

Slightly over 60%. We bought our home in a great neighborhood in the Bay Area in 2009 and were renting before that. The appreciation since then has been a bit on the insane side. We're not planning on moving anytime soon so while the increased home equity looks good on paper, it's not exactly like having money in the bank.
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Meg77
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Re: What % of net worth is your home?

Post by Meg77 »

I understand what you are getting at, but I don't think there is any right answer for all the variable reasons you mentioned, so I don't think you should base your decision on what percentage of your net worth (or total assets) to contribute toward housing. A far more important ratio is what percentage of your budget goes toward housing - whether you rent or own. Also far more important is whether you are on track to meet other goals like saving for retirement when deciding how many resources to devote to housing.

But for the record, my husband and I just bought a home and the current home equity represents about 14% of our net worth. The total value of the house represents appx 24% of our assets. The important thing for me when deciding how much house to buy was making sure we could still afford to max out retirement accounts and keep our fixed costs at 50% of our take home pay (I like to have a lot leftover for travel and dining out). I worked backward from there to get to a down payment amount.

But sometimes it also makes sense to stretch, especially if you plan to own it indefinitely and you expect your income to rise over time - or if things like school district or a super long commute are factors.
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Walleyewhacker
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Re: What % of net worth is your home?

Post by Walleyewhacker »

LCOL area 20% ish Best of all, paid for. We are both 50ish years young
iflyjetzzz
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Re: What % of net worth is your home?

Post by iflyjetzzz »

MCOL area.
Home equity is ~1% of net worth
Home value is ~25% of net worth; amount borrowed is ~150% of annual income.
Just moved to a different part of the country and bought the house a few months ago.
Early 50s.


The biggest mistake you can make is to look at a house as an investment. Just buy the minimum house that you're able to get by with. It's a living expense, not an investment. More house = more monthly expenses for heating, cooling, maintenance.
Bacchus01
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Re: What % of net worth is your home?

Post by Bacchus01 »

Main house: 10%
Second house: 2%

That's equity, not total value. I don't understand why you would use resale value as that's not what goes into your net worth.
bluelight
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Re: What % of net worth is your home?

Post by bluelight »

High COL area, house is about 10% of net worth. Purchased in 1993, paid off in 2012.
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obgyn65
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Re: What % of net worth is your home?

Post by obgyn65 »

6.2%, paid cash.
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lululu
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Re: What % of net worth is your home?

Post by lululu »

I don't consider my home as part of my net worth. No idea what it would sell for, regardless of its assessed value, at some point in the future, or how long it would take to sell, plus it's going to be under water eventually since it's near the coast. It saves me paying rent, but I pay more in property tax and maintenance.
johncunningham
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Re: What % of net worth is your home?

Post by johncunningham »

HCOL area. Equity represents ~26% of networth. Home price around 80% of networth. Age 30's. Outstanding balance ~1.6x Income.
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g$$
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Re: What % of net worth is your home?

Post by g$$ »

0%. I'll rent forever.
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Re: What % of net worth is your home?

Post by Bacchus01 »

lululu wrote:I don't consider my home as part of my net worth. No idea what it would sell for, regardless of its assessed value, at some point in the future, or how long it would take to sell, plus it's going to be under water eventually since it's near the coast. It saves me paying rent, but I pay more in property tax and maintenance.
You may not consider it part of your investment portfolio, but it is absolutely part of your net worth.
dewey
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Re: What % of net worth is your home?

Post by dewey »

Market value of home would be roughly 19% of our net investable assets, but we don't count the house as part of our net worth.
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island
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Re: What % of net worth is your home?

Post by island »

We don't count it as part of our net worth either, but if we did it's probably 18%, paid off and HCOL area. San Diego.
SunnySeattle
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Re: What % of net worth is your home?

Post by SunnySeattle »

We are in a HCOL area, house is 42% of our net worth, paid off, and we are just into our 40's.

Good luck with your decision!
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Re: What % of net worth is your home?

Post by John Doe 123 »

redacted
Last edited by John Doe 123 on Mon Mar 09, 2015 8:25 pm, edited 1 time in total.
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dumbbunny
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Re: What % of net worth is your home?

Post by dumbbunny »

Zero. I rent.
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Re: What % of net worth is your home?

Post by travellight »

[quote]You may not consider it part of your investment portfolio, but it is absolutely part of your net worth./quote]

this again....yes, net worth is just all of one's assets minus all debts, so home equity should be counted in one's nw.

My home value and equity is 36% of my net worth, HCOL area, early 50s.
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madbrain
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Re: What % of net worth is your home?

Post by madbrain »

HCOL area, about 80%, and I bought my very large home foreclosed near the bottom of the housing crisis.
It has appreciated more than all of my other assets in the last 4.5 years. I do not expect that trend to continue.
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Re: What % of net worth is your home?

Post by Valuethinker »

madbrain wrote:HCOL area, about 80%, and I bought my very large home foreclosed near the bottom of the housing crisis.
It has appreciated more than all of my other assets in the last 4.5 years. I do not expect that trend to continue.
The London scenario. Prices dipped about 10% say in the Crash, then have risen say 50%.

My housing equity is more than 50% of net worth. Whatever I do, the housing equity catches up on everything else. Instead of 0% long run return, I am averaging something like 6% real return pa on housing for 20 years (HOWEVER Victorian homes also suck money, so that's a gross return so net return won't look as impressive).

It's all so random though. Had I bought in another city, it would have been nothing like.
Last edited by Valuethinker on Tue Dec 23, 2014 4:57 am, edited 3 times in total.
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corner559
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Re: What % of net worth is your home?

Post by corner559 »

0%. I rent.
Valuethinker
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Re: What % of net worth is your home?

Post by Valuethinker »

iflyjetzzz wrote:MCOL area.
Home equity is ~1% of net worth
Home value is ~25% of net worth; amount borrowed is ~150% of annual income.
Just moved to a different part of the country and bought the house a few months ago.
Early 50s.


The biggest mistake you can make is to look at a house as an investment. Just buy the minimum house that you're able to get by with. It's a living expense, not an investment. More house = more monthly expenses for heating, cooling, maintenance.
I think it's easy to overlook how much a house COSTS. Utilities. Property taxes. Maintenance tends to be irregular, but then in huge lumps-- new roofs, drainage etc. And if you try to sell a house with an 'old' kitchen, value will come off the house. Conversely a new kitchen, you won't get full value back for the money you spent on it.

Say you own a house for 30 years. I reckon it's easy to spend c. 50% of the value of that house in Repairs Maintenance and Improvement.
Valuethinker
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Re: What % of net worth is your home?

Post by Valuethinker »

financial.freedom wrote:I'm sure this question will depend on a lot of factors, for instance:

1. HCOL area might have a higher % than someone in LCOL area.

2. Younger person (say in 30s) might focus on buying home before building up a nest egg, so might have higher % net worth in the home.

The reason I ask is that we could have a wide range. We are young, could put everything into our "forever home" depleting taxable VG accounts, savings accounts etc. Or, we could buy a "for now" home that is less expensive and would be a good place for 5-10 years. We could take out a 15-year mortgage on this home, build more equity and then buy our "forever" home in 5-10 years. Or we could keep renting...

I'd like to compare the range we are looking at to what others have done on this forum. Thank you for the feedback!

Edit: I'm leaving it open as to how to determine the value, because I think that provides insight. Maybe listing both equity and total market value (rough value that your home would be listed on Zillow etc.) would be helpful. I think one's age is also helpful.
I am a big fan of buying once, and never again.

But life isn't like that in that jobs move, careers change, marriages change etc. etc.

So I would say yes, buy a house if you intend to remain in that area for at least 5-10 years. It's a reasonable way to use capital if your average holding period is 10 years. US housing prices are unlikely to do what they have done in the last 30 years, again, but population and economic growth continues, zoning restrictions grow ever tighter (that latter factor is especially true of HCOL areas, usually coastal, N/S California, Seattle, Portland, Boston, NYC, Washington etc.). This is less true in places like Texas or the South or Midwest where there are few restrictions on new housing developments.

If you DO find your 'buy forever' home then it may well be worth stretching for it. But you have to believe those factors won't change. And remember, location over everything else. The right neighbourhoods don't go down in a crash as much as the rest, and they go up more in the recoveries. If the 'right' factor is schools that can deteriorate, or some local change (loss of big employer etc.) can make the area less attractive, so that's a risk. But desirable areas tend to stay desirable.

I would avoid depleting tax deferred accounts (or missing using annual contributions) to them if I could. You can't get that back. Exception might be a 401k (if not a particularly good one) after getting the company match.

Housing equity is really just avoided rent. It's not a great investment (should keep up with inflation but doesn't always, and not in every major metropolitan market).

As a Talmudic rule: one third in property, one third in business, one third in investments. Take that as a feeling that it shouldn't be, roughly, more than 1/3rd of your net worth in housing equity. However in high demand places, that's impossible for most young couples-- just to get on the ladder you are going to have to put too much into housing-- the situation usually isn't so bad in your late 40s.
Last edited by Valuethinker on Tue Dec 23, 2014 5:11 am, edited 1 time in total.
lululu
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Re: What % of net worth is your home?

Post by lululu »

Bacchus01 wrote:
lululu wrote:I don't consider my home as part of my net worth. No idea what it would sell for, regardless of its assessed value, at some point in the future, or how long it would take to sell, plus it's going to be under water eventually since it's near the coast. It saves me paying rent, but I pay more in property tax and maintenance.
You may not consider it part of your investment portfolio, but it is absolutely part of your net worth.
Only for my heirs. I have to live somewhere.
ubermax
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Re: What % of net worth is your home?

Post by ubermax »

Less than 0.20% - Is that good or bad :happy
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