Home value as a percentage of net worth

[Sam]

The market value (not the equity) as a percentage of your net worth today.

Example:
Home value: 250K (equity in home 100K)
Net worth (including equity in home): 500K
Answer = 250/500 or 50%

 

[HFWR]

~34%

 

[CybrMike]

if u have two homes do u add them?

 

[Sam]

If you actually live in both homes, I would say yes.

 

[justin]

voted 101% to 150%. Age is a huge factor to this question. For most 20-somethings it is going to be 100%+ of net worth. For the 50-something FIRE type, it'll be a rather small percentage in general.

 

[mickeyd]

I do not usually include the value of our home in any of my calculations as I really do not know the true value of it (until it is sold) and I have no plans on selling it any time soon. Also, even though by defination the home is an asset of mine and should be part of the net worth #, I would only have to buy another place to live at probably a similar amount of $ so what's the use?

It's value probably less than 10%~my guess.

 

[JustCurious]

I do not usually include the value of our home in any of my calculations as I really do not know the true value of it (until it is sold) and I have no plans on selling it any time soon. Also, even though by defination the home is an asset of mine and should be part of the net worth #, I would only have to buy another place to live at probably a similar amount of $ so what's the use?

First, it is because (as you said) your home is, by definition, an asset, which must be included in your net worth calculation. Thus, since we all use the same definition, it is a constant barometer. The definition of net worth is agnostic as to whether you can live the asset.

Second, it is not true that you would have to buy another place. There are many people who rent or lease.

 

[retire@40]

First, it is because (as you said) your home is, by definition, an asset, which must be included in your net worth calculation. Thus, since we all use the same definition, it is a constant barometer. The definition of net worth is agnostic as to whether you can live the asset.

Second, it is not true that you would have to buy another place. There are many people who rent or lease.

Your post is a fusion of right and wrong. True, a house is always an asset and it is always part of net worth by definition. But, in calculating net worth for purposes of determining a SWR from which you will draw for living expenses, you may or may not include your home in your calculation, depending on whether or not you will use any proceeds from the house for living expenses.

If you plan on living in your house until they day you die and will not do a reverse mortgage, sell it, rent it, etc., then your house is a sunk cost, no different than the pencil on your desk.

 

[Corporateburnout]

Your post is a fusion of right and wrong. True, a house is always an asset and it is always part of net worth by definition. But, in calculating net worth for purposes of determining a SWR from which you will draw for living expenses, you may or may not include your home in your calculation, depending on whether or not you will use any proceeds from the house for living expenses.

If you plan on living in your house until they day you die and will not do a reverse mortgage, sell it, rent it, etc., then your house is a sunk cost, no different than the pencil on your desk.

The poll is asking for the percentage of your house value as part of your net worth. It is not asking whether you use it to determine your SWR for living expenses.

 

[mathjak107]

It depends for what purpose and why you are figuring your net worth .For estate tax purposes i would count it,for a loan a bank would count it.
I prefer not to count a personal residence in net worth for retirement purposes unless i was ready to liquidate it.If i was taking a loan against it i would subtract out the loan though..I wouldnt count it anymore than i would subtract off my net worth my future rent payments if i didnt own a house .A home is a consumption item until the day comes that your no longer consuming it.I have some origonal art work on my walls which i love.I dont count that either .Maybe one day ill want to sell them,at that point i would count it,same goes for jewelry.

 

[Vincenzo]

Arg! I chose the wrong answer. I chose 31 to 45% when it is actually 10 to 20%.

 

[unclemick]

8.5%

Heh heh heh

 

[DRiP Guy]

I love the fact that even thought the poll's parameters were quite straightforward, it also led to a very good but compact discussion of how to properly consider a home in terms of NW and also FIRE, SWR. Thanks to all!

 

[REWahoo]

I love the fact that even thought the poll's parameters were quite straightforward, it also led to a very good but compact discussion of how to properly consider a home in terms of NW and also FIRE, SWR. Thanks to all!

heh, heh, heh.... http://early-retirement.org/forums/index.php?topic=3219.0

 

[DRiP Guy]

heh, heh, heh.... http://early-retirement.org/forums/index.php?topic=3219.0

Whew!

Today's little excursion seems to have whittled a few miles off of the journey, as compared to the prior thread!



Thanks!

 

[furpants]

Hmm, I am currently the ONE person down there at the bottom with my home being around 200% of my net worth. Interesting.

 

[Cut-Throat]

Well, when I bought my first house. I had a net worth of about 1,000 - The house was worth about $50K so, at that point in time my house was 5,000% of my net worth

 

[dmpi]

Hmm, I am currently the ONE person down there at the bottom with my home being around 200% of my net worth. Interesting.

You must be young. Most of us here are old farts.

 

[REWahoo]

You must be young. Most of us here are old farts.

You used the wrong smilie...

 

[Sam]

Arg! I chose the wrong answer. I chose 31 to 45% when it is actually 10 to 20%.

It's ok. I should have checked the box allowing one to revote. Will remember to do it next time.

 

[AltaRed]

I won't vote because it is stupid to compare apples and oranges. The ONLY value you have in your home is your equity.

 

[Sam]

I won't vote because it is stupid to compare apples and oranges. The ONLY value you have in your home is your equity.

So sorry my poll did not meet your intellectual criteria.

 

[retire@40]

I won't vote because it is stupid to compare apples and oranges. The ONLY value you have in your home is your equity.

Why is he comparing apples to oranges? He's asking what percentage of home equity makes up your total net worth. Simple and valid question.

People are messing this calculation up by not using the correct divisor. Using the formula the OP gave, how could home equity ever be greater than 100% of net worth?

edit: I went back to reread the original question. He did ask for market value instead of equity, so he's missing the liability component to the equation, if there is one.

 

[justin]

Why is he comparing apples to oranges? He's asking what percentage of home equity makes up your total net worth. Simple and valid question.

People are messing this calculation up by not using the correct divisor. Using the formula the OP gave, how could home equity ever be greater than 100% of net worth?

OP is asking for market value of home divided by net worth. My home is worth $150k (fair market value), but I only have $40k in equity. I use $150k as the numerator, and my net worth as the denominator.

 

[Sam]

Thanks Justin. I thought the question was simple too. Anyway, I'm in the 21-30%. But it'll be in the 10-20% range when I RE a few years from now.

Thank you all for participating.