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House cost as % of net worth
Old 02-27-2021, 10:30 AM   #1
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House cost as % of net worth

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.
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Old 02-27-2021, 10:34 AM   #2
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I don't know if there is a rule of thumb, but 15% doesn't sound like anything I'd worry about.

My home is currently valued at about $450k, that's for a SF 3/2 under 2000 sf. If I moved I'd be paying at least $600k for something a little bigger. Average COL area.

If you have a NW of $2m, then 15% is $300k. I'd place any bet that for most folks here with a NW of 2M their home is currently at least $300k.
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Old 02-27-2021, 10:41 AM   #3
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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.
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Old 02-27-2021, 10:46 AM   #4
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A person's age really determines this to a large degree.
My first house was 560% of my net worth... after monthly expenses I had $20 left over !!

Every year our home (diff home) becomes a smaller % of net worth as our investments go up a lot more than our house does. Our house is worth what we paid 18 yrs ago
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Old 02-27-2021, 10:52 AM   #5
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Our house is probably around 5.5% of our net worth. Weve been here twenty years and prices have not appreciated a great deal over that time compared to some places. Were in the Philly suburbs.
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Old 02-27-2021, 10:52 AM   #6
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Our home value is approximately 20% of our net worth. Interestingly enough, the real property taxes, insurance, maintenance and repairs on it run about 20% of our spending.
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Old 02-27-2021, 10:52 AM   #7
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15% sounds good to me. We are about the same pct, and we are in mid 60s, but I built the house in 1994.
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Old 02-27-2021, 11:04 AM   #8
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I'm at 30%.
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Old 02-27-2021, 11:09 AM   #9
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A person's age really determines this to a large degree.
+1

This is a line item in my annual NW spreadsheet I have going back to 2001. At that time (age 43), House value was over 70% of net worth. At the end of last year, it was less than 14%. So 15% is not an issue.
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Old 02-27-2021, 11:09 AM   #10
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I don't think there is any general answer, because house prices are incredibly variable depending on where you live. If the price of the house you're building is reasonable for your area, and you can afford it without a stretch, then you're fine.
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Old 02-27-2021, 11:12 AM   #11
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We built a new house 4 years ago that equals 20% of our NW not including the house. We feel comfortable so 15% would be even better.
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Old 02-27-2021, 11:23 AM   #12
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Quote:
Originally Posted by rafapark View Post
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.
When I bought my Dream Home (back in 2015) it was 16% of my net worth, and the major landscaping project that I did immediately to make it what I wanted, plus the costs of moving and selling my prior home, added another 6%. So, overall the purchase and move into my present home cost me 22% of my 2015 net worth. By now, using Zillow's estimate of its value, it represents 15% of my 2021 net worth.

I am perfectly comfortable with a home of this value, and would have felt OK if it had cost 2-3 times as much. I was very happy that the house that I truly wanted, my Dream Home, did not cost that much.

I am a 72 year old woman living alone, and I am a total homebody. I don't have any desire to travel or spend money on RVs, boats, planes, and so on. But my home is extremely important to me and being able to live in this wonderful home brings me a lot of value as I grow older. I think a lot depends on your understanding of what is important to YOU (not me!).
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Old 02-27-2021, 11:58 AM   #13
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Thanks

Quote:
Originally Posted by JRon View Post
We built a new house 4 years ago that equals 20% of our NW not including the house. We feel comfortable so 15% would be even better.
Yes.That is how I figured. When we started constuction we targeted 10% of our net worth but with all the additions and modifications is now 15%. We are also targeting 15 % to 20% of our total expenses for house expenses when we move.

Thank you all for your responses.
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Old 02-27-2021, 11:58 AM   #14
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House is ~10% net worth. House has appreciated 350% in 30 years.
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Old 02-27-2021, 12:00 PM   #15
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Originally Posted by twaddle View Post
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.
It's really just this simple. That's a whole let better than some almost arbitrary number that doesn't consider age, whether you have a large pension, and so on.
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Old 02-27-2021, 12:09 PM   #16
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I would think as a general concept 15% is not overly stressful on a budget.
I personally would personally give pause at over 30%.
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Old 02-27-2021, 12:15 PM   #17
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Originally Posted by W2R View Post


I am a 72 year old woman living alone, and I am a total homebody. I don't have any desire to travel or spend money on RVs, boats, planes, and so on. But my home is extremely important to me and being able to live in this wonderful home brings me a lot of value as I grow older. I think a lot depends on your understanding of what is important to YOU (not me!).
Come on....blow that dough!

My combined values on my home and vacation condo is a little over 16% of my NW. I paid a little less on the condo than I did on my house but now the condo is worth a lot more. Not much growth on homes in small town MS.
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Old 02-27-2021, 12:19 PM   #18
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I would think as a general concept 15% is not overly stressful on a budget.
I personally would personally give pause at over 30%.
What's the math behind those %s?
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Old 02-27-2021, 12:24 PM   #19
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What's the math behind those %s?
No exact math, just based on general spending percentages that I and other folks I know have spent on non house needs.
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Old 02-27-2021, 12:24 PM   #20
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Another calculation we made was that even if the house was 15% of our net worth we still can withdraw 2.5% of our balance for our total yearly expenses. Maybe that is a better calculation.
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