House cost as % of net worth

[donheff]

The market value of our house is about 20% of net worth. The basis is probably around 7% of net worth. The all in costs of mortgage payments, property taxes, and maintenance, who knows but probably a wash on what it would have cost to rent equivalent space.

 

[Andre1969]

In my case, when I bought the house, in 2018, its purchase price represented about 30.2% of my net worth. A more important figure is how much did I borrow, as a percent of investible assets. In that case, it wasn't that much different actually, about 26.7%.

I figure the total net worth number is relatively meaningless, since it includes equity, not only in the house I bought, but also in another property I own. That equity doesn't really give me any income to live off of, to help pay the mortgage, unless I borrow against it.

Fast forward to today, and the purchase price of the house is about 24.3% of my entire net worth. The outstanding mortgage is about 20.5% of my investible asset value.

 

[Surewhitey]

Thinking back to 1999, we moved to Dallas and had a 20% down & little NW. Heck, I didn't know what NW was...

Moving to LA on 2007, it was closer to 30% of NW (before the move).

Renters for 8 years, and returning to Dallas in 2015, probably 27%

2021 in the 2nd home in 6 years, we're at 18% & comfortable with this.

Home taxes, insurance and maintenance are 33% of basic spending (minus travel & renovation). This is something we could improve if living outside the city, but we're 1 street from DD & DGD... not going anywhere soon.

I'd say the % of monthly spending is something to watch more than % of net worth. Or maybe they track similarly? Depends on appreciation rate of all assets?

 

[RHONDAVE]

Yeah, more math questions.
Saw a post recently that looked like this...


NW - real estate = ?, divide by your annual spending equals a figure.
The OP had 43 and members said thats ok.
Where is the chart so I can see whats not ok.

 

[flintnational]

We are at about 8%. But we are considering a 2nd home that would push it to maybe 17%. I fall into the camp that believes there are too many variables for % of NW to be very useful. A sustainable WR after NW-HP would be my benchmark. That is the measure I am using while considering a second home.

 

[ArmchairMillionaire]

My apologies if this question has been asked before but I did a quick search and could not find the answer. Curious on what % of net worth is a good number to have invested in a house. I am talking primary residence. The reason I ask is that we are retired, 64YOs, we are building a house and it is ending up costing around 15% of our net worth. I was wondering what other people have in a similar situation.

I agree that this number will vary with age and location.

For example, we bought our current home in 2009 for $42K. We had a net worth of less than $200K then so it was a little under 20% of our net worth at the time.

Nowadays we could probably sell it for around $65K but our net worth has climbed to $1.25M so our home only makes up around 5% of our net worth.

Seems like a good number to start with but your 15% now could be 5% ten years from now.

 

[Surewhitey]

I agree that this number will vary with age and location.

For example, we bought our current home in 2009 for $42K. We had a net worth of less than $200K then so it was a little under 20% of our net worth at the time.

Nowadays we could probably sell it for around $65K but our net worth has climbed to $1.25M so our home only makes up around 5% of our net worth.

Seems like a good number to start with but your 15% now could be 5% ten years from now.

1.05 growth in 11 years... Impressive.

 

[RHONDAVE]

21.8% of NW (which included the home)

 

[RunningBum]

I disagree with the premise.

I always suggest buying the house you need, not the house you can afford.

The house I "need" is 2BR (or 1BR with a guest futon somewhere), 1 bath room, a kitchen, eating area and small living room. That's not what I'm going to live in though.

I think you mean buy the house that meets your wants and needs. Then it helps to determine what you can afford, to see if you have to give up features you really want.

 

[ArmchairMillionaire]

1.05 growth in 11 years... Impressive.

Thanks!

Been maxxing out 401(k), IRA, (R)IRA and HSA accounts for the last 5 years or so. Was putting away at least 20% of income before that. Now it's closer to 50% with the house paid off and no car payments.

Plus, the 11.2% average annual rate of return on my Vanguard and 11.12% on my JH funds over the past 10 years certainly helped.

 

[54andchange]

15% now in a low cost of living area for retirement, post geo-arbitrage move from a medium cost of living City while working. Career/City pre-retirement number was 35% . Similar size and quality of houses in both areas.

 

[jkern]

My house is 40% of my NW, but that doesn't matter. The real question is your income (including any SWR from portfolio) greater than your total cost to maintain your standard of living. For example, if you have a $150K pension, but your Standard of Living cost $100K, your home can be 100% of your NW and it doesn't matter.

 

[street]

I did post my home as 3.5% of my net worth which is correct. When I add the ranch with my home that is in town, the combined is 13% of my net worth.

There is no income from the ranch now so will add that to my home percentage of my NW.

 

[TOOLMAN]

4% of NW.

 

[ncbill]

Currently ~7.5%, would like to see it much lower.

 

[kjpliny]

About 33% of net worth. HCOL area. No mortgage.

 

[Markola]

About 28% in our mid 50s and newly FIREd. Home values have long grown about 4.2%/year in this area and we kind of have age 72 or so pegged for downsizing, cashing out and being done with yards, snow and stairs. It’s hard to predict our health, portfolio, SS and other conditions that far out but 72 seems a turning point.

 

[indiajust]

I was 2/3 house, 1/3 retirement, and 10k in cash.

Much more lovely now, 100% investments and no house! Free at last!

 

[2177V]

I do not believe there is a rule of thumb of how much your house should be as a % of your net worth. I am retired now and I am more concerned about any future unexpected negative cash flow such as medical expenses. I do not want to liquidate assets that may have declined after a market crash, or after a housing crash so I have a rainy day fund.

Mothers would tell their children to save for a rainy day and they were right because they have experienced hard time while we have experienced a record setting bull market. I do not recall my Mom telling me to have a X% of my house as part of my net worth. If you do have a rainy day fund, then the X% of your house as part of your net worth should not be a significant factor.

 

[Emerson11]

I'm at 1/3 of NW. It works form me because I don't like to travel and my enjoyment comes from home life; gardening, friends visiting, and children treating it as a vacation destination. It all depends on what you want to do with your time.

 

[Suppertime]

4 years into retirement, just moved to a 25% more expensive house. House is 40% of net worth. 40% feels high.

My mental accounting for the house is how much rent is it saving me tax free. It's around 2.5-3% what I paid.

I reduced my allocation to fixed income which is yielding nothing.

 

[steveark]

Those percentages sound pretty high. Our paid for house represents 5% of our net worth.

 

[USGrant1962]

Those percentages sound pretty high. Our paid for house represents 5% of our net worth.

Why do you say that? The median house in the US is ~$300K. At 5% the median ER member would need a $6M net worth, which is pretty high. 5% sounds pretty low. Great if you can do it, but hardly common.

 

[tb001]

About 33% of net worth. HCOL area. No mortgage.

Perhaps that’s a better question. We’re in a HCOL area as well. The house is 25-30% of our net worth, but our mortgage is under 5%. While we could pay it off, we’re very happy with our low interest loan at the moment!

Expenses associated with the home are probably 30+% of our annual budget. Perhaps more. But we’re homebodies and, with young kids, don’t travel a ton. So while it’s a bigger expense line than others might have, it’s in the budget.

 

[ychuck46]

You should be fine

15% is probably somewhat normal for many here in this forum. I very seldom count our home when I think of our net worth, but it would be somewhere between 10-15% if I did.