Defining "House Poor"
Defining "House Poor"
I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Last edited by mbasherp on Fri Feb 23, 2018 11:36 am, edited 2 times in total.
Re: Defining "House Poor"
I have considered No more than 30% of take home pay applied towards monthly mortgage to not become house poor,,coupled with other living expenses.
Preferably 25% or less.
Preferably 25% or less.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Defining "House Poor"
I believe it is a variation of "land poor" - European aristocrats who owned land that wasn't productive. Think Chekhov's play, "The Seagull," or even Downtown Abbey.
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Re: Defining "House Poor"
I would consider you house poor if you find your mortgage payment prevents you from saving at a healthy clip, or prevents you from spending in other areas you want to (whether it be travel, eating out, etc).
Re: Defining "House Poor"
You see it mentioned here, because one poster continues to hammer on folks who he perceives as too much house. From what I can tell, he feels that folks who own a house more than about $500k or $600k are house poor.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this may term may be used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
I don't think "house poor" is a Boglehead term, rather, it's a term used by a subset of posters on the Boglehead forums.
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Re: Defining "House Poor"
Personally, I don't see it in the sense of DTI or monthly payment. If too much of your net worth is composed of home equity, I would consider that house poor.
Obviously that can vary dramatically by age and location. But pre financial crisis, tons of people (mostly in coastal states, but not exclusively) were banking on selling their homes for big bucks in a "market that never goes down!" and moving to a LCOL state. We all saw how that ended up. Plus it can be a very illiquid asset based on market conditions.
I'm 36 and our home equity makes up about 25% of our net worth.
Obviously that can vary dramatically by age and location. But pre financial crisis, tons of people (mostly in coastal states, but not exclusively) were banking on selling their homes for big bucks in a "market that never goes down!" and moving to a LCOL state. We all saw how that ended up. Plus it can be a very illiquid asset based on market conditions.
I'm 36 and our home equity makes up about 25% of our net worth.
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Re: Defining "House Poor"
I think the husband and I are house poor -- our home equity is currently 33% of our net worth, but it used to be over 50%.... (those were some tough years!)
Re: Defining "House Poor"
I don't know...if you have a $2 million paid for house and $1.9 million in the bank I'd say you're doing pretty well with an over 50% home equity situationTwstdSista wrote: ↑Fri Feb 23, 2018 11:41 am I think the husband and I are house poor -- our home equity is currently 33% of our net worth, but it used to be over 50%.... (those were some tough years!)
Last edited by Jags4186 on Fri Feb 23, 2018 11:45 am, edited 1 time in total.
Re: Defining "House Poor"
I think "house poor" means that your mortgage, property taxes, insurance eats up too much of your income. This means you do not save "enough" to keep your retirement goals on track.
"Enough" is very subjective. I have friends who save little and plan to work until 67 or 70 and live off Social Security. They live "in the moment". They borrow often. Don't save for future spending. Don't save for their kids college.
"Enough" might be maxing your pre-tax 401ks, Roth IRAs, HSA and having some money left over for taxable investing, kids college, vacations, charitable donations and a car purchase now and then.
For many it is somewhere in between those "enoughs". Only you can determine where you are at and what your goals are.
"Enough" is very subjective. I have friends who save little and plan to work until 67 or 70 and live off Social Security. They live "in the moment". They borrow often. Don't save for future spending. Don't save for their kids college.
"Enough" might be maxing your pre-tax 401ks, Roth IRAs, HSA and having some money left over for taxable investing, kids college, vacations, charitable donations and a car purchase now and then.
For many it is somewhere in between those "enoughs". Only you can determine where you are at and what your goals are.
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Re: Defining "House Poor"
This
Percentages of net worth or ratios of payments to income are a blunt approximation, but don't seem as precise as focusing on the nominal amount left outside the home equity or payments.
is a better definition than this,Go Blue 99 wrote: ↑Fri Feb 23, 2018 11:26 am I would consider you house poor if you find your mortgage payment prevents you from saving at a healthy clip, or prevents you from spending in other areas you want to (whether it be travel, eating out, etc).
or this,fishmonger wrote: ↑Fri Feb 23, 2018 11:38 am If too much of your net worth is composed of home equity, I would consider that house poor.
What matters is what is left after the house. For someone with a large net worth, having 75% tied to a house is not a problem - the remaining 25% more than suffices for all their needs and desires.
Percentages of net worth or ratios of payments to income are a blunt approximation, but don't seem as precise as focusing on the nominal amount left outside the home equity or payments.
Re: Defining "House Poor"
This is where I struggle a lot with the term house poor.Go Blue 99 wrote: ↑Fri Feb 23, 2018 11:26 am I would consider you house poor if you find your mortgage payment prevents you from saving at a healthy clip, or prevents you from spending in other areas you want to (whether it be travel, eating out, etc).
Bogleheads is a financial forum with an eye intended to be focused on making financially good decisions.
If a mortgage payment, which is used to purchase an appreciating asset, limits the amount of spending one can do on travel and eating out, I don't think that is a bad thing from a financial standpoint.
There might be many reasons why one would prefer to spend money on whatever (travel, meals out, etc) but from a financial standpoint the money is generally better off flowing into a house than being spent on other things.
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Re: Defining "House Poor"
I've wondered this, too.
Our gross monthly income is $5,291.66. After taxes ($911.06), pre-tax health insurance ($6), and pre-tax 401k contributions ($300), our take home pay is $4,074.60.
Our mortgage (PITI) is $808 (29% down on a $209,000 house resulting in a $149,000 loan at 3.875%). We invest $916/month into our Roth IRAs, which are now at $54,000 (combined with the 401k). We're investing $1,216 per month, but I think we need to be investing $1,400 to reach our retirement goal. So I need to figure out how to get that up.
Our PITI is 19.8% of net and 15.3% of gross (and 25.6% of our after-tax-after-investments income of $3,1158.60). And we put an extra $250/month toward principal.
So our percentages are pretty good, but we have more home equity ($61,000) than we have retirement accounts ($54,000).
Are we house poor and, if so, when would stop being house poor? When retirement is more than equity? When retirement is double the equity? I don't know.
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Re: Defining "House Poor"
There is no boglehead definition of house poor, just like there is no boglehead definition of 'best asset allocation'. In the end, it comes down to personal preference.
Example: Someone who is risk averse might say the best asset allocation is 30:70 stocks:bonds. Someone who is less risk averse might say 80:20. And you'll get everything from 0:100 to 100:0. You'll even have people using 3x margin and a 100:0 stock portfolio, though maybe not that common on bogleheads.
So going back to housing. There are a few aspects that apply here.
One is your cash flow. This is where Debt to Income (DTI) comes in. The bank will have a limit. Fannie Mae is 36%, but allows this to go higher (45-50%) depending on credit and assets. However, that's usually based on gross pay, so when you also subtract out taxes the money left over for you to actually spend is much lower. At this level almost all of your money would be going towards the house, with little left for savings, retirements, or budgeting for home repairs. This is one extreme of house poor, and one that I think most people would agree upon.
Keeping to cash flow, you'll see either smaller DTI values, or a suggestion to think in Net Income rather than Gross. 25% of Net income going towards PITI is one common recommendation as an upper level. This leaves you 75% of Net Income for savings and spending.
The other aspect is in terms of net worth. Lets say you're 55 and own your $600k home outright. You have $50k in an IRA, and otherwise no other retirement savings, and no debts. In this situation, the bulk of your net worth is tied up in your home. So even though little of your cash flow is going towards the home, the majority of your savings are tied up in the home, and so you could be considered house poor.
Like DTI, there is no agreed upon cutoff here. Most Americans have the bulk of their assets tied up in their homes, and therefore could be considered house poor even after the mortgage is paid off. But do you go with 50:50 House:Savings, or 25:75, or 10:90 as a cutoff? All comes down to your personal decisions. The greater the percentage of your assets tied up in a single property, the more risk you're taking in terms of valuation. Much like owning a single stock. And outside a reverse mortgage, you can't use the equity in the home to pay expenses. You could sell the home to move into a cheaper home, but you would incur 6-10% sales fees to do so, and might not be able to do so quickly. A house is, after all, a rather illiquid asset unless you're willing to sell for a sizable loss.
This is why both cash flow and equity is often considered when it comes to deciding if you are 'house poor'.
Example: Someone who is risk averse might say the best asset allocation is 30:70 stocks:bonds. Someone who is less risk averse might say 80:20. And you'll get everything from 0:100 to 100:0. You'll even have people using 3x margin and a 100:0 stock portfolio, though maybe not that common on bogleheads.
So going back to housing. There are a few aspects that apply here.
One is your cash flow. This is where Debt to Income (DTI) comes in. The bank will have a limit. Fannie Mae is 36%, but allows this to go higher (45-50%) depending on credit and assets. However, that's usually based on gross pay, so when you also subtract out taxes the money left over for you to actually spend is much lower. At this level almost all of your money would be going towards the house, with little left for savings, retirements, or budgeting for home repairs. This is one extreme of house poor, and one that I think most people would agree upon.
Keeping to cash flow, you'll see either smaller DTI values, or a suggestion to think in Net Income rather than Gross. 25% of Net income going towards PITI is one common recommendation as an upper level. This leaves you 75% of Net Income for savings and spending.
The other aspect is in terms of net worth. Lets say you're 55 and own your $600k home outright. You have $50k in an IRA, and otherwise no other retirement savings, and no debts. In this situation, the bulk of your net worth is tied up in your home. So even though little of your cash flow is going towards the home, the majority of your savings are tied up in the home, and so you could be considered house poor.
Like DTI, there is no agreed upon cutoff here. Most Americans have the bulk of their assets tied up in their homes, and therefore could be considered house poor even after the mortgage is paid off. But do you go with 50:50 House:Savings, or 25:75, or 10:90 as a cutoff? All comes down to your personal decisions. The greater the percentage of your assets tied up in a single property, the more risk you're taking in terms of valuation. Much like owning a single stock. And outside a reverse mortgage, you can't use the equity in the home to pay expenses. You could sell the home to move into a cheaper home, but you would incur 6-10% sales fees to do so, and might not be able to do so quickly. A house is, after all, a rather illiquid asset unless you're willing to sell for a sizable loss.
This is why both cash flow and equity is often considered when it comes to deciding if you are 'house poor'.
Re: Defining "House Poor"
House poor = you buy more house than you need. Plain and simple.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Time is the ultimate currency.
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Re: Defining "House Poor"
My own definition: any dwelling with a purchase price over 2x my annual gross income.
From what I've gathered over the years, many people here consider 3x annual income to be the upper limit of how much house you can buy.
It doesn't get spent on other things. The extra money gets invested and buys me time.
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Re: Defining "House Poor"
To add to my above, I think impact of cash flow or equity to define house poor varies with age. A couple just starting out buying their first house is bound to have a huge chunk of their equity tied up in their down payment. But if they can afford the PITI while also saving for retirement, I wouldn't consider them house poor. A 65 year old trying to retire with a $2 million dollar home paid off and $200k in the bank might be house poor. If he can live off SS and 4% of $200k, then maybe not, but that's still a lot of equity tied up into the house even if there is no more mortgage.
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Re: Defining "House Poor"
Downtown Abbey sounds like the more urban, housing-project version of Downton Abbeyanonenigma wrote: ↑Fri Feb 23, 2018 11:25 am I believe it is a variation of "land poor" - European aristocrats who owned land that wasn't productive. Think Chekhov's play, "The Seagull," or even Downtown Abbey.
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Re: Defining "House Poor"
I guess Bill Gates is house poor while Warren Buffet is not.thangngo wrote: ↑Fri Feb 23, 2018 11:58 amHouse poor = you buy more house than you need. Plain and simple.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Re: Defining "House Poor"
So 99% of all house buyers are house poor? What you need is vastly different than what you want for most buyers. For example having more than 1 bathroom is a want not a need unless your a family of like 10.
Re: Defining "House Poor"
So you think owning an 11 million dollar house on the coast of CA is a need not a want?Jags4186 wrote: ↑Fri Feb 23, 2018 12:08 pmI guess Bill Gates is house poor while Warren Buffet is not.thangngo wrote: ↑Fri Feb 23, 2018 11:58 amHouse poor = you buy more house than you need. Plain and simple.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Re: Defining "House Poor"
Re: Defining "House Poor"
You're house poor if the financial obligation that comes with owning or renting a house gives you significant financial stress. This financial stress could be as obvious as you staying awake at night because you are worried about the next payment But also as little as you having to significantly curtail or modify your lifestyle, or financial goals, so you can afford that house payment.
In other words, if you can make your house payments, without losing any sleep, while living a comfortable life at the level you want to live, and being able to reach your financial goals (eg. retire or become financially independent at the rate you wanted), then you are doing fine. If you are sacrificing on those things to live in a certain house, you are house poor.
To be clear, I am not saying being house poor is a bad thing. Lots of people who are forced to live in VHCOL areas are forced to be a bit house poor. There are people who really value the experience of home ownership, and love "nesting" and it is worth to them.
In other words, if you can make your house payments, without losing any sleep, while living a comfortable life at the level you want to live, and being able to reach your financial goals (eg. retire or become financially independent at the rate you wanted), then you are doing fine. If you are sacrificing on those things to live in a certain house, you are house poor.
To be clear, I am not saying being house poor is a bad thing. Lots of people who are forced to live in VHCOL areas are forced to be a bit house poor. There are people who really value the experience of home ownership, and love "nesting" and it is worth to them.
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Re: Defining "House Poor"
I would say this is the best barometer to make confirm if one is house poor or not. If you have a 2 million dollar home and making payments are not hurting you reach your financial milestones then you are fine. If you have a 100k home and have trouble saving for retirement because all the money is going into mortgage payments then you are house poor. As you can see there is no % number that can easily be used to say yes or no. I all matters on the other parts of your finances. This is why it is not so easy to place that label on someone else.Go Blue 99 wrote: ↑Fri Feb 23, 2018 11:26 am I would consider you house poor if you find your mortgage payment prevents you from saving at a healthy clip, or prevents you from spending in other areas you want to (whether it be travel, eating out, etc).
Good luck.
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Re: Defining "House Poor"
Someone who is considerably poorer than their house would make them appear. Technically I think I'd be house poor under that definition, I'm fine with that.
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Re: Defining "House Poor"
Nah, Buffet also would also be house poor because he has way more house than he needs... While not in the same realm as Gates, Buffet's house is still huge.
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Re: Defining "House Poor"
I thought house poor was defined as follows: You ask on Bogleheads, "Am I house poor." If When Klangfool responds you are house poor, then you are house poor.
Re: Defining "House Poor"
eye.surgeon wrote: ↑Fri Feb 23, 2018 12:05 pmDowntown Abbey sounds like the more urban, housing-project version of Downton Abbeyanonenigma wrote: ↑Fri Feb 23, 2018 11:25 am I believe it is a variation of "land poor" - European aristocrats who owned land that wasn't productive. Think Chekhov's play, "The Seagull," or even Downtown Abbey.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Defining "House Poor"
Yeah, pretty much. I'm guilty as well. I bought more house than I need, but not by much. I bought it during 2008 so it's dirt cheap compared to market highs. I justified it as I plan for future children. People tend to do this with all purchases where the wants defeat the needs. I'm fortunate enough to make more money that it's not detrimental to my goals to achieve financial independence (50 x annual expense) by 50.
Time is the ultimate currency.
Re: Defining "House Poor"
I would agree with this. But really, this is merely a manifestation of someone who is tying up so much of their income towards the house that they cannot afford a lifestyle commensurate with the home, even if the house payments themselves are being paid.
Personally, I'm ok with people being house poor when they are starting out - especially in a HCOL area. But people established in their careers should really be at 25% or below unless it's somewhat temporary, IMO.
Re: Defining "House Poor"
This definition is unknowable and unquantifiable. What you think I need may be different from what I think I need. And vice versa.thangngo wrote: ↑Fri Feb 23, 2018 11:58 amHouse poor = you buy more house than you need. Plain and simple.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Arguably, no one needs a house. Everyone could live in a trailer. You could live in a tent. Many do.
Conversely, childless wealthy people who can easily afford 15,000 square foot homes have more than they "need," but are not house poor.
Families living in 450 sq. foot houses in California could use more house, but may still be house poor do to inflated home prices.
House poor is when your housing costs are so much that they leave you struggling to pay other reasonable obligations each month. If you could easily pay them, you would not be "poor." If you could easily pay them if you had less housing costs, you are house poor.
The minute you are house poor, you will know exactly what it means. The feeling is immistakable.
JT
P.S. This seems about right: https://financial-dictionary.thefreedic ... house+poor
Last edited by bottlecap on Fri Feb 23, 2018 3:25 pm, edited 2 times in total.
Re: Defining "House Poor"
I visited a co-workers home many years ago -about a year after they bought the house. No living room furniture. Small kitchen set for 2. That was all that they had in public space of their home. Nice big home but no money for much of anything else.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
Re: Defining "House Poor"
I only had a small sofa, table, a bed and a small dresser in my first home. I didn't need anything else and didn't bother buying anything else until I moved into a house with my husband.Dottie57 wrote: ↑Fri Feb 23, 2018 2:45 pmI visited a co-workers home many years ago -about a year after they bought the house. No living room furniture. Small kitchen set for 2. That was all that they had in public space of their home. Nice big home but no money for much of anything else.mbasherp wrote: ↑Fri Feb 23, 2018 11:16 am I've seen this come up several times recently on the boards and it has me scratching my head. What do you think is the BH definition of house poor? How about your own definition? At a glance, I think this term when used by Bogleheads might be a world away from any common definition. (Like many, I suppose.)
I ask because I consider the possibility of DW staying home in the future, which would significantly change our DTI calculation with our current mortgage payments.
Examples:
35/25/15% of gross/net pay on mortgage - can save 30/20/10% for retirement - where's your line?
Edited for clarity.
I say house poor is when you can't afford anything other than your house and basic necessities (or less). By a lot of posters' standards, I am house poor. My house was $500,000, which was almost 5x my husband's salary at the time. We had a healthy down payment. We have a 4 bedroom McMansion for 3 people and every family member can be sitting on a different toilet at the same time. Now that is luxury! And the mortgage, property taxes, and upkeep are just about 1/2 of our take home pay each month. We make enough to live very comfortably on the balance while still having an emergency fund, saving for college, and the 401k, and still travel. I don't care if they think I'm house poor. I would certainly care if I thought I was house poor, though!
Re: Defining "House Poor"
OP,
If the house price is more than 40% of your net worth excluding your house, you are "House Poor".
KlangFool
If the house price is more than 40% of your net worth excluding your house, you are "House Poor".
KlangFool
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Re: Defining "House Poor"
Purchase price or current value?
That means a young family, say 30 years old, buys a house for $300,000. They would need at least ~$750,000 in other assets in order to be non-house poor?
So, essentially everyone under the age of 40 or 50 is house poor, as it takes folks most of their working careers to save up several hundred thousand in savings?
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Re: Defining "House Poor"
^ It's official -- I am house poor. I'm okay with that -- gotta live somewhere!
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Re: Defining "House Poor"
We bought a house in a HCOL area and put 20% down with a 3.5% fixed loan from Navy Federal. We have a mortgage that started at 3.25X our gross income (more than I wanted to pay). That said, we’re maxing our retirement savings, have college and grad school paid for, have no credit card debt, have a nice grandfathered tax deduction, and positive cash flow.
I’m cheap when it comes to cars and restaurants.
I intend to downsize when my daughter moves out in the years to come, and again when we retire. If this is house poor, so be it.
I’m cheap when it comes to cars and restaurants.
I intend to downsize when my daughter moves out in the years to come, and again when we retire. If this is house poor, so be it.
Last edited by Dan-in-Virginia on Fri Feb 23, 2018 9:24 pm, edited 1 time in total.
Re: Defining "House Poor"
miamivice,miamivice wrote: ↑Fri Feb 23, 2018 3:11 pmPurchase price or current value?
That means a young family, say 30 years old, buys a house for $300,000. They would need at least ~$750,000 in other assets in order to be non-house poor?
So, essentially everyone under the age of 40 or 50 is house poor, as it takes folks most of their working careers to save up several hundred thousand in savings?
<<Purchase price or current value?>>
Purchase price.
<< That means a young family, say 30 years old, buys a house for $300,000. They would need at least ~$750,000 in other assets in order to be non-house poor? >>
Yes.
<< So, essentially everyone under the age of 40 or 50 is house poor, as it takes folks most of their working careers to save up several hundred thousand in savings?>>
We have a choice: to be like everyone else or to be rich. I make my own decision and you make yours.
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Re: Defining "House Poor"
I don't see how using home equity as a percentage of net worth makes any sense to determine "house poor"
Say you have a $300K house with $100K in equity in it, and you have cash/investments of $100K making your home equity/net worth a 50% ratio. If I offer to pay off your mortgage for you, all of a sudden your home equity/net worth has jumped to a 75% ratio, but you haven't gotten anymore "house poor".
Say you have a $300K house with $100K in equity in it, and you have cash/investments of $100K making your home equity/net worth a 50% ratio. If I offer to pay off your mortgage for you, all of a sudden your home equity/net worth has jumped to a 75% ratio, but you haven't gotten anymore "house poor".
"The problem with diversification is that it works, whether or not we want it to"
Re: Defining "House Poor"
TheRightKost87,TheRightKost87 wrote: ↑Fri Feb 23, 2018 3:27 pm I don't see how using home equity as a percentage of net worth makes any sense to determine "house poor"
Say you have a $300K house with $100K in equity in it, and you have cash/investments of $100K making your home equity/net worth a 50% ratio. If I offer to pay off your mortgage for you, all of a sudden your home equity/net worth has jumped to a 75% ratio, but you haven't gotten anymore "house poor".
In my definition, the home equity is not counted at all. So, the person has 100K net worth excluding the house and the house price is 300K. The person is definitely "House Poor".
KlangFool
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Re: Defining "House Poor"
Someone is house poor if they own less than one house.
25% stock, 25% bonds, 25% cash, 25% stuff
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Re: Defining "House Poor"
Sound.climber2020 wrote: ↑Fri Feb 23, 2018 12:03 pmMy own definition: any dwelling with a purchase price over 2x my annual gross income.
But you'd likely be homeless in Los Angeles.
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Re: Defining "House Poor"
Yeah, I always thought in income terms as well.bottlecap wrote: ↑Fri Feb 23, 2018 2:44 pm House poor is when your housing costs are so much that they leave you struggling to pay other reasonable obligations each month. If you could easily pay them, you would not be "poor." If you could easily pay them if you had less housing costs, you are house poor.
The minute you are house poor, you will know exactly what it means. The feeling is unmistakable.
JT
P.S. This seems about right: https://financial-dictionary.thefreedic ... house+poor
Currently trying to help an older relative (early 70s) who has been in their home ~40 years but still has a mortgage and HELOC (refinanced several times to make ends meet)
Right now they're spending ~50% of their income on mortgage/HELOC/insurance/taxes.
They're so strapped for cash that they even delayed signing up for Medicare Part B until this year (and will now pay a hefty lifetime penalty)
EDIT: +1 to "all hail Klangfool!"
Last edited by ncbill on Fri Feb 23, 2018 3:36 pm, edited 1 time in total.
Re: Defining "House Poor"
FoolMeOnce,FoolMeOnce wrote: ↑Fri Feb 23, 2018 3:27 pmSo someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m? Odd definition.
Why? It makes perfect sense to me. The house's price is big enough that it affects the overall financial well being of the person.
<<So someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m?>>
In both cases, the house's price is large enough to matter. If the house is 1m with 7m liquid investment, the house does not matter at all. The house could worth $0 and it won't matter. It is too small in term of the overall portfolio.
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Re: Defining "House Poor"
It is hard for me to imagine someone with $70m liquid to have a house that affects their financial wellbeing. (On Earth)KlangFool wrote: ↑Fri Feb 23, 2018 3:36 pmFoolMeOnce,FoolMeOnce wrote: ↑Fri Feb 23, 2018 3:27 pmSo someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m? Odd definition.
Why? It makes perfect sense to me. The house's price is big enough that it affects the overall financial well being of the person.
<<So someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m?>>
In both cases, the house's price is large enough to matter. If the house is 1m with 7m liquid investment, the house does not matter at all. The house could worth $0 and it won't matter. It is too small in term of the overall portfolio.
KlangFool
Re: Defining "House Poor"
FoolMeOnce,FoolMeOnce wrote: ↑Fri Feb 23, 2018 3:40 pmIt is hard for me to imagine someone with $70m liquid to have a house that affects their financial wellbeing. (On Earth)KlangFool wrote: ↑Fri Feb 23, 2018 3:36 pmFoolMeOnce,FoolMeOnce wrote: ↑Fri Feb 23, 2018 3:27 pmSo someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m? Odd definition.
Why? It makes perfect sense to me. The house's price is big enough that it affects the overall financial well being of the person.
<<So someone with a $3m house and $7m liquid investments is house poor? Or $30m and $70m?>>
In both cases, the house's price is large enough to matter. If the house is 1m with 7m liquid investment, the house does not matter at all. The house could worth $0 and it won't matter. It is too small in term of the overall portfolio.
KlangFool
Why? It is not hard. If the person buys a 100m house and owed 80m on the house, the person is in a seriously bad financial shape.
It does not matter how much that a person has. He/she could always spend enough on a house to get themselves into trouble.
KlangFool
Last edited by KlangFool on Fri Feb 23, 2018 3:48 pm, edited 1 time in total.
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Re: Defining "House Poor"
HA!!!!
OP, personally, i shoot for saving at least 15% with no more than 25% of tax home going to mortgage.
Last edited by fulltilt on Fri Feb 23, 2018 3:52 pm, edited 1 time in total.
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Re: Defining "House Poor"
House Poor: a term used by realtors and mortgage bankers to describe someone with the capacity to have a bigger mortgage than they currently enjoy.
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