House cost as % of net worth

[RE2Boys]

At current vluations, about 6% of NW represented by primarly residence. Purchased about 15 years ago, 2200 sq ft, in modest cost of living area. House itself is 58 years old, I'm 71.

 

[street]

My home is 3.5% of our net worth at current value. It is 35 years old and is 2000sf with an attached double garage.
I built my home and has came up in value through the years. A huge savings with equity building from the start with doing all the work myself.

 

[Alex The Great]

I believe what is important w/r to FIRE is not how much of your NW is in house, but how much is property tax combined with other maintenance cost you pay each year for primary residence.
My house is ~50% of the total NW which is not normal but may happen at high COLA. I consider it as a last resort for living expenses, when all other sources fail.

 

[skyking1]

It is such a subjective thing like so many questions here. If your entire future income stream is from your NW, then it makes sense to think of it that way. That is not our case or many others.
I plan on blowing the dough to the tune of about 40% over the first ten years of retirement, between building the new home and a generous vacation budget.

 

[Cobra9777]

FWIW, the current FMV of our home is 21% of NW (including the home). Our property tax, insurance, and maintenance are 14% of annual spend. The house is 53 years old and way too big for the two of us. But we love the property and neighborhood, which is unique for our area. So we plan to stay a while longer. But inevitably we will downsize to a smaller, more energy-efficient house, with a smaller maintenance backlog. We are not targeting a specific % of NW. But I suspect it will be in the 15% range just based on the location and type of properties we are thinking about.

 

[CardsFan]

Our townhome/condo is about 5% of our net worth.

But I don't see any issue with 10-15%, if that is what you want.

And, of course, there are some here with a much higher percent only because the home value has appreciated from when they bought.

 

[tb001]

We are 25-30%. Closer to 30% when we bought. We live in an area housing is expensive. Our biggest spend is housing related as well. If at some point we decide to downsize, our spending also will go down significantly. Withdrawal rate today is a little over 3% for our annual spend.

If I looked at home value, my parents have probably over 60% of their net worth in their property, possibly much more. A paid off home, with sub-dividable land in an area that’s appreciated significantly. My mom wants to sell but her 93 yr old DH does not. He’s created a trail along the edge of their land and enjoys ‘walking the property’ each morning. They have ‘enough’ and at 93, who can argue with that logic.

 

[Dtail]

Our townhome/condo is about 5% of our net worth.

But I don't see any issue with 10-15%, if that is what you want.

And, of course, there are some here with a much higher percent only because the home value has appreciated from when they bought.

Yeah any calculation of % is probably more useful when first buying as a highly appreciated home skews the numbers.

 

[38Chevy454]

I don't view it as a percentage that has to be followed. What amount of savings do you need for your budget withdrawals? Take that off your total and the remainder can theoretically be used for housing. Example, if you need $60K/year and use the 4% rule as a guide, you would need $1.5M in savings. If you have $2.5M in savings then you could spend up to $1M for housing. Which $1M may not be out of line for some higher COL areas. $1M out of $2.5M is 40% if you want percentages. Location plays a very big role in housing costs.



I do not also count housing in net worth, it is meaningless as I have to have a place to live. My house also does not generate periodic income, at least until it is sold if the value has gone up. In reality my house has annual costs for taxes, insurance, upgrades and maintenance. Those costs are part of the budget needs.

 

[calmloki]

2.6% here for purchase price of Oregon and California homes / Net Worth. Buying an old POS that needed multiples of its purchase price to be made decent in 1994 and an auction foreclosure in 2010 really messes up the numbers. Using current plausible market value for the houses we are around 10.26% of our NW in our two homes.

 

[Golden sunsets]

11.5% here. I feel we could up that % to move to our forever home.

 

[rafapark]

11.5% here. I feel we could up that % to move to our forever home.

That is what we are doing. We are building our dream home in South Carolina. Moved from Florida.

 

[WhenIsItTime]

My house might be worth 30% of my net worth, but if it is fully mortgaged then isn’t it 0%.

Seems question might be asking about home equity tied up in real estate or trying to get at home operation costs which could vary wildly from home FMV or purchase price.

What is the real ??

 

[WestUniversity]

Let NW be your net worth before house purchase. Let HP be the price of the house.

If you can retire safely on NW-HP, you're good to go. Percentage doesn't matter.

+1

 

[doneat54]

Equity in the 2 homes we own is probably around 20%. Launching a 2 year plan now to migrate completely into the lake house and sell the other. And have no mortgages. At that point equity/NW will be around 15%.

 

[Katsmeow]

I think some are talking about different concepts. That is some are talking about house cost as percentage of net worth and others are talking about current value as percentage of net worth. I would also say there is a difference between house cost and mortgage value.

Personally I don't think house cost v. net worth is very important.

To me the more relevant factors:

1. What is your debt to income ratio. if you have a mortgage, will the cost of that mortgage (plus taxes and insurance on the house) allow you to easily make those payments and have enough money to do whatever you want.

2. If you are paying cash for a house or putting down a large down payment, how much money does that leave you? Will that leave you enough money for all of your needed and discretionary spending.

I see this as personal. That is if you spend half your net worth on a house and you still have enough money for all the spending you want to do then fine. If you spend 15% of your net worth on a house and you can't cover your bills afterward then that is a problem.

 

[rk911]

we've been in our home sinxe 1988. in those days our home was a much larger % of our NW. these days it's about 10% of our NW.

 

[Rambler]

Home is about 10% of NW, or about 12% of non-home net assets. Tax, insurance and maintenance come to about 3.5-4% of budget.

 

[tb001]

My house might be worth 30% of my net worth, but if it is fully mortgaged then isn’t it 0%.

Seems question might be asking about home equity tied up in real estate or trying to get at home operation costs which could vary wildly from home FMV or purchase price.

What is the real ??

Your net worth should incorporate the debt owed on your house. So for us I would calculate it as the value of our home plus other assets, minus any debt we carry.

And agree with others who have said it’s a different question if it’s grown due to appreciation vs original purchase, but that appreciation still usually comes with tax consequences, etc. and if you wanted to sell and purchase something equivalent in the same area, the cost would be the same.

Ours is high. But I like where we live and we can afford it. If that changes, hopefully that gives us options.

 

[mrfeh]

I disagree with the premise.

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

 

[DrRoy]

If you can retire safely on NW-HP, you're good to go. Percentage doesn't matter.

+1. Ours happens to be 7%.

 

[Finance Dave]

Ours is around 18%. Was a lot higher when we bought 24 years ago....maybe 30% then.

 

[Badger]

Reflecting back about 50 years my first very modest house we bought on an auction from an estate and needing a lot of work cost us $17k with a 8.75% interest. Our combined gross income was about the same. I quickly learned how to do all the repairs or do without. Those were very lean years of living pay check to pay check. Our entertainment was to walk around the shopping mall where there was air conditioning. It was Florida and hot. Our net worth consisted of the $2k down payment on the house and a VW beetle but with a mortgage. It is amazing what you can do if young and motivated with a plan.
Things are much different now. If the value of our house where we presently live is included in our net worth then it is about 14% but there is no mortgage.


Cheers!

 

[thod]

Our house is about 9% of our current net worth. We bought it about 30 years ago.

 

[bingybear]

The value of of the house/assets has been done a number of times. usually it is done as a poll



I doubt you want to use the cost in 1991.


nah


value/assets < 5%