Poll - House value to net worth

[RISP]

What is the value of your house to your total net worth, as a percent, using your best guess at the current estimated market value. If you have a mortgage, subtract it from your net worth.

Of course you exclude your mortgage from your net worth. It's called 'net worth' after all, as in 'assets net of liabilities'.

For us, Market value of home / Net worth would be 88%.

I assume what you really meant is "If you have a mortgage, subtract it from your [-]net worth[/-] home value, and count only the equity".

Then we get:
(Market value of home - Mortgage balance) / (Market value of all assets - All debt) = Home equity / Net worth = 65%.

Those of the previous posters who replied "10-15% in California" probably made the same assumption, or you guys are all crazy rich.

 

[USGrant1962]

Ah. Another what is in your "net worth" discussion.

I don't count my house or cars in my net worth..ok..well..that is not your net worth, that is your "selective worth".

I count this asset, but not that. I count this liability but not that one. Well, that isn't your "Net" worth then. :-(

+1

 

[phil1ben]

"But if you have 4M or more in NW, you deserve as much home as you wish, as you can afford it since your other investments and income sources likely more than cover your desired needs. I expect it might be a linear growth in housing % proportional to gross NW."

I agree with the above. Someone with a 30MM NW may have homes which are worth 10MM (i.e. 33%) but there is enough to support them even in retirement. If that same person reduced the percentage of his home values/NW to 5% then he/she would have a home worth 1.5MM and an additional 8.5MM to invest. However, the issue at higher NWs is not affordability or having enough money....... but living out the remainder of your days where you want and how you want. The additional 8.5MM in investable assets (aside from home equity) does not advance the ball any, except to perhaps leave more money to heirs. So I am saying the percentage cannot be analyzed in a vacuum.

Also, I believe it is more logical to include home value in NW when one has multiple homes because (not based on any scientific research) the owner may be more likely to look at the equity in each home (often no mortgage in place because of itemized deduction phase-outs under the tax code) as an investment and trade them somewhat as a commodity when local markets move up or down.

 

[Danmar]

So I am saying the percentage cannot be analyzed in a vacuum.

This would be my view. Overall level of NW could have an impact, in either direction. Just because you can afford more real estate doesn't necessarily mean you will want more or have more. There are plenty of reasons why you might have more or less real estate as a percentage of total net worth.

Where you live has to be a big reason. Toronto vs Tupelo?

Whether you highly value real estate, like W2R or not.

Age, dependants

Whether you include your pension in NW (I do).

Each person decides on their own "sweet spot"

Remember averages can be misleading. The average American has one testicle.

 

[stepford]

I doubt anyone is calculating net worth including the NPV of any pension or annuity income. In my mind net worth includes all assets, but I understand some people don't see it that way.

Well, you'd be wrong in at least one case. My pension is a relatively small part of my NW (under 20%), but I do include its NPV in my calculation. I think this would be particularly important for poll participants who are "pension rich but asset poor". Otherwise you might start to get housing percentage results skewing anomalously high.

 

[Ready-4-ER-at-14]

I wonder if part of the disparity in thinking about whether or not a home should be included in net worth or not might be our mindsets about selling it for a profit?

I have purchased, fixed up while living there and sold for profit a number of times. It was always home sweet home but never symbolically Tara, my home plantation (from gone with the wind), to me. Place I am in now, I have a sign that says welcome to Paradise, but eventually I will probably sell and move.

Way I calculate things about 8.5% of net worth. But it is an ongoing expense, and not an asset to me UNLESS I am willing to sell some day, which I or my estate will.

 

[kcowan]

My friends, much better off than us, have multiple homes in the 1m+ range in various places they like to be. They might be 25% of their NW, but what else can you buy besides homes, cars and yachts for fun. Most remove $ from NW by form of trusts to the kids.

Yes I have noticed the same thing. They seem to trust real estate more than stocks. Often their multiple houses are shelters for their children too.

 

[W2R]

I wonder if part of the disparity in thinking about whether or not a home should be included in net worth or not might be our mindsets about selling it for a profit?

Maybe so.

I do know this: the only purpose ever I have for calculating my net worth, is to use it in threads like this one. It is a completely worthless statistic to me.

I do not plan to ever sell my home or move again.

I included some phonied-up best guess as to the value of my home when doing the calculation for this thread. However I forgot to include the NPV of my pension and SS in my net worth, and included nothing for the contents of my home. For my car, I used the trade-in value that the local Hyundai dealer mentioned in a recent spam snail mail designed to get me to trade it in for a Hyundai. I'm not too concerned about the effect of any of these errors on computation of a meaningless quantity.

 

[RobbieB]

I include the value of my house in net worth because it belongs there by definition and it is a significant amount.

If you want to talk about investable assets I won't.

 

[Ready-4-ER-at-14]

I do find including everything useful for a couple reasons. Legally a home might be attached somehow say in a car accident and you probably need to protect that somehow, and that might include umbrella insurance besides your regular auto insurance.

The entire size of the estate might be determining if you use a roll over trust or not. Better to see the need approaching five years earlier than be surprised.

Finally I found it a fun challenge to determine net present value of cash flows of things I initially had no idea how to measure or estimate so had to fill in the other blanks.

 

[rodi]

Well, it does matter ... sometimes It's not so much the tying up capital that led me to my small home. It was the ongoing maintenance. Lower ongoing expenses allowed me to retire early.

Yes and no.
Our maintenance is the same as folks in less expensive areas for a similar house. Our house is only 2k sf. We've worked on reducing our carrying costs by improving insulation/windows/roofs/xeriscaping. Our taxes are (artificially) low because Prop 13 keeps it from increasing more than 1%/year.

What's expensive about our house is the dirt it sits on. NOT the house. The house is modest, 50 years old, and the improvements we've put in are to lower the ongoing cost. It's truly a case of location driving the price up... Not the modest house.

 

[bmcgonig]

Yes and no.
Our maintenance is the same as folks in less expensive areas for a similar house. Our house is only 2k sf. We've worked on reducing our carrying costs by improving insulation/windows/roofs/xeriscaping. Our taxes are (artificially) low because Prop 13 keeps it from increasing more than 1%/year.

What's expensive about our house is the dirt it sits on. NOT the house. The house is modest, 50 years old, and the improvements we've put in are to lower the ongoing cost. It's truly a case of location driving the price up... Not the modest house.

Similar. I live in the Bay Area so it's around 50%. Prop 13 helps as I've owned it over 20yrs. Since I really don't want to move outside the Bay Area even if I downsize it would still be 35-40%.

I'm very aware that I would be a lot "richer" financially if I lived elsewhere... That's for sure. But then I also look at it as good long term care coverage as well as a nice CCRC entry. That's somewhat of a compensation, but not really ?

 

[Choices]

We just sold out in our HCOL area and are now homeless. I used the value we sold for and came up with 19% which is ridiculous! We drift from hotel to hotel....

 

[Koolau]

During this exercise, I realized that my house value has increased enough since purchase that I'm now in a higher "bracket." Even though my "investable" assets have also increased, the house value has increased more (percentage). I bought at the bottom of the bubble bust and the recovery has exceeded the original bubble. YMMV

 

[Scuba]

This would be my view. Overall level of NW could have an impact, in either direction. Just because you can afford more real estate doesn't necessarily mean you will want more or have more. There are plenty of reasons why you might have more or less real estate as a percentage of total net worth.

Where you live has to be a big reason. Toronto vs Tupelo?

Whether you highly value real estate, like W2R or not.

Age, dependants

Whether you include your pension in NW (I do).

Each person decides on their own "sweet spot"

Remember averages can be misleading. The average American has one testicle.

[emoji23][emoji23][emoji23] Love this, Danmar!

 

[dd564]

I am somewhat surprised by the low numbers on a percentage basis.
My NW (including the value of my home since that constitutes NW) is barely 7 figures.
I don't consider myself in a high cost of living area either.
Evidently there are a lot of really wealthy people responding to this poll.

 

[Koolau]

I am somewhat surprised by the low numbers on a percentage basis.
My NW (including the value of my home since that constitutes NW) is barely 7 figures.
I don't consider myself in a high cost of living area either.
Evidently there are a lot of really wealthy people responding to this poll.

I suppose that depends upon what you mean by "very wealthy" (which we have had threads on as well.) Certainly, the local housing market makes a big difference. We went from a very low % of NW to relatively high % of NW just by moving to a HCOL area.

"Barely 7 figures" sounds like about a mil, so the median house price in the US on the order of $190K would be about 19% of NW. If you have 2 mil, then it's only 9% of NW. Yes, 2 mil is significantly more than 1 mil, but I guess I wouldn't call it "very wealthy". We could start another poll or thread on what we think "very wealthy" means, but that's usually a very personal opinion so YMMV.

 

[Happyras]

I suppose that depends upon what you mean by "very wealthy" (which we have had threads on as well.) Certainly, the local housing market makes a big difference. ............... so the median house price in the US on the order of $190K would be about 19% of NW. If you have 2 mil, then it's only 9% of NW. Yes, 2 mil is significantly more than 1 mil, but I guess I wouldn't call it "very wealthy". We could start another poll or thread on what we think "very wealthy" means, but that's usually a very personal opinion so YMMV.

Our Zip code, per Zillow, the median house price is $900k. We own a home valued above the median price, but it is not that impressive. This is why it is really hard to correlate this poll result with HCOL areas.

 

[dd564]

I suppose that depends upon what you mean by "very wealthy" (which we have had threads on as well.) Certainly, the local housing market makes a big difference. We went from a very low % of NW to relatively high % of NW just by moving to a HCOL area.

"Barely 7 figures" sounds like about a mil, so the median house price in the US on the order of $190K would be about 19% of NW. If you have 2 mil, then it's only 9% of NW. Yes, 2 mil is significantly more than 1 mil, but I guess I wouldn't call it "very wealthy". We could start another poll or thread on what we think "very wealthy" means, but that's usually a very personal opinion so YMMV.

Very wealthy is twice as much as you have, right?

 

[Koolau]

Our Zip code, per Zillow, the median house price is $900k. We own a home valued above the median price, but it is not that impressive. This is why it is really hard to correlate this poll result with HCOL areas.

Because we own a condo, we're under the average for our area but it's still a lot more "valuable" than the "big" house we used to own. Definitely "location, location, location."

Very wealthy is twice as much as you have, right?

Sounds about right!

 

[Surewhitey]

Based on current home prices and not including pension and SS values, we're at 25%. LCOL TX is not so LCOL anymore with all the growth in DFW. When we pull the plug (again), we'll likely cut that in half, reducing property taxes by same %...

 

[zesty]

0%, I think I will always be a renter.

 

[pb4uski]

Primary residence = 15.5%
Winter condo = 5.9%

I'm never sure whether to consider the winter condo separate from our retirement portfolio or not... while since we paid in cash we no longer get income from that money what we pay annually for carrying costs is much lower that what renting for 6 months would cost us so it is a bit of a push.

 

[2017ish]

...

Each person decides on their own "sweet spot"

Remember averages can be misleading. The average American has one testicle.

Yeah, but what about the average Canadian?

[valid point as to averages, and even to medians, though.]

 

[MichaelB]

Yeah, but what about the average Canadian?

My son-in-law tells me there are no average Canadians; like the residents of Lake Wobegon, they are all above average.