Poll - House value to net worth

[Tree-dweller]

I put 25% or more, but I don't count the value of pension in my NW normally, so I didn't include that in the calculation. Otherwise it would have been quite a bit lower.

Likewise.

 

[Blue Collar Guy]

Some very interesting answers, horses, pension values, disliking of the poll, meaningless.. There is even a comment on another thread didnt we do this poll aready? ,hahahah too funny.

 

[street]

Barely over 5%

 

[ejman]

I have a 1400 sq-ft house on a 7000 sq-ft lot. Yup, pretty small. But it doesn't cost much to heat or cool and it's a cozy nook for 2 people with no stairs. I've lived in this house for 28 years and no plans to move. During that time it's tripled in value but the property tax has gone up only 60%. Last year I installed solar to keep my utilities low.

It's one thing that makes for a nice stress free retirement -

Thank you for the clarification. Somehow based on prior posts I pictured a 10,000 sq/ft mansion with manicured acres of lawns and a a nice chauffeur driven Bentley parked in the driveway. This makes a lot more sense as to the reported expenditures on other luxuries which are peanuts cost wise in comparison. Good job!

 

[RobbieB]

Hehe, yeah I didn't get to be in the high fidelity first class section eating caviar and wagyu by blowing all my dough on housing -

As long as I don't buy the million dollar house and a Maserati I can do pretty much whatever I want.

 

[Aiming_4_55]

10% or more but less than 15% for now, it may get below 10% when I move to semi-ER in the future, i.e. in about 2 years

From my other post....11.5% based on current net worth and no mortgage. Working until the BS bucket overflows, sometimes I feel it's a matter of days, but thinking a couple of years, then semi-retire to other options to be determined.

Its a modest 3 bedroom condo, 1,400 sq ft in Southern California, excellent schools for the kids and about 10 minutes from the ocean. We purchased with the idea that semi-retirement was within 5 years, so wanted the maintenance free/association fee trade off. Association fee and taxes are below $1,000 per month so it's pretty cheap. It's working so far.

 

[OneDay]

My home is worth less than 10% of my net worth.

 

[texcurtis]

25%

 

[Koolau]

The popularity of this thread suggests we should have a poll. http://www.early-retirement.org/forums/f28/house-value-to-net-worth-87686.html

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 the market value. If you have a mortgage, subtract it from your net worth. If you have multiple residences for personal use, include them all.

At least a couple of questions occur from responses so far?

1) Should we (how should we) use NPV of SS and/or pension? I've never used these in NW calc.

2) Should we include the value of home in NW? Currently I don't do that but it would make a significant difference in the answer.

 

[scrabbler1]

A very interesting poll...If not the home, what does make up the majority of net worth?

For me, my after-tax portfolio represents most of total NW. It is just under 60%. My rollover IRA is about 33% and my small co-op apartment I own outright is the rest, about 7%. It's the monthly and quarterly dividends coming from the after-tax portfolio which supply me with the money to cover my expenses, leaving its principal untouched. I lack unfettered access to the IRA for the next 5 years but it has been growing nicely since late 2008.

 

[Tallman4123]

Just a smidgen over 10% for us. Mortgage-free and pension-free so a very straight forward calculation...

 

[Happyras]

I don't consider horses in my net worth, either.

And even if I actually owned a horse, I probably wouldn't include it in my net worth.

It is interesting to note that we have 6 horses currently. Last year we bought one for 100K and it broke (went permanently lame), wrote it off. We spend about 12K/mo keeping a few of them in training, they are worth what someone will pay. One we have is for sale, most likely will get <100K for it. But it costs >25K/yr to keep it in training. My point being, the horses are a fairly large asset, but also a significant drain on cash flow. Then again, so is a house.

 

[bloom2708]

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. :-(

 

[ikubak]

+1 for bloom

 

[neihn]

3 homes. 2 in US, 1 in Vietnam, about 25% net worth.

 

[RunningBum]

If you don't include your home as part of your net worth for purposes of this poll, some people could wind up with negative %, or even worse, could blow up the poll with a divide by 0 error. I assumed the OP wanted it included since the mortgage was deducted from the net worth.

 

[Live And Learn]

I live in coastal SoCal... nuff said.

Doesn't matter... I like where I live. My house is paid off and moderately sized (2k sf). It doesn't cost much to stay here since Prop 13 keeps the taxes low.

I could sell and buy something cheaper elsewhere... but I have enough nest egg I don't need to. And, like I said... I like where I live. I like being a 15 minute drive to the beach (where I walk the dog, daily). I like being coastal with the moderating breezes/temps. I like my neighbors.

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.

 

[nash031]

Just above 25%. I don't include home value in my FI calculations until I sell and it becomes investible. Unfortunately, since you always need someplace to live, and that place always costs money, you're going to lock up some capital in a living space anyway. For us, I consider our $120,000 down payment plus the accelerated payoff of the HELOC of $108,000 to be that sunk capital in our house. The regular mortgage payments, then, are basically our "rent", except that we get to "keep" part of that "rent" in the form of equity each month.


I've always looked at owning a house as a conservative means of savings until we settle on our forever home. My growth is kept in my stock portfolio.

 

[MichaelB]

At least a couple of questions occur from responses so far?

1) Should we (how should we) use NPV of SS and/or pension? I've never used these in NW calc.

2) Should we include the value of home in NW? Currently I don't do that but it would make a significant difference in the answer.

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.

 

[MichaelB]

Thanks for all the responses (so far). It is not a surprise to see almost half own homes that represent less than 15% of their net worth. In my mind (and very unscientifically), the "10% but less than 15%" is the sweet spot of the LBYM range for home ownership, and I would also guess it is in the top decile of all households in the US.

If I were to answer this poll the month after we bought our first home, my response would have been >50%. So much depends on age, demographics, and other factors not reflected here.

 

[Danmar]

Thanks for all the responses (so far). It is not a surprise to see almost half own homes that represent less than 15% of their net worth. In my mind (and very unscientifically), the "10% but less than 15%" is the sweet spot of the LBYM range for home ownership, and I would also guess it is in the top decile of all households in the US.

If I were to answer this poll the month after we bought our first home, my response would have been >50%. So much depends on age, demographics, and other factors not reflected here.

How would you define "sweet spot"? Probably a personal opinion to some degree? Probably your percentage? Most of us think our spending habits are "in the sweet spot" or we would change them, no? Depends mostly on where you live. I guess most people think they live at "the sweet spot" or they would move? Just wondering.

 

[MichaelB]

How would you define "sweet spot"? Probably a personal opinion to some degree? Probably your percentage? Most of us think our spending habits are "in the sweet spot" or we would change them, no? Depends mostly on where you live. I guess most people think they live at "the sweet spot" or they would move? Just wondering.

Yes, a personal opinion, and quite unscientific, as I indicated in my post.

No, it's not my current level. "LBYM Sweet spot" for me means spending less on housing than the median and the average in the US. Most people spend far more than 15%, that's for sure.

If median household savings are $60k and average retirement savings for households near retirement (age 60) are less than $200k, and the median home price is less than $200k, it looks like the typical household in the US would have a home value to net worth of around 50%. Back of the envelop math.

So, with that in mind, my comment was this group has a much lower number, probably because we deliberately spend less on housing and save more, and that shows in the numbers. That's what I meant by "sweet spot".

 

[Happyras]

Sweet spot is nebulous. If your NW is 1M or less, it would be hard to justify more than 10-15% in housing, as the balance would be a small sum to amortize over the retirement, particularly if you have limited sources of cash flow from investments or pensions. 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. 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.

Fun poll, but missing some key variables to be correlated.

 

[NW-Bound]

...what else can you buy besides homes, cars and yachts for fun. ...

Jimmy Choo shoes and expensive show tickets?

Well, one must be like Imelda Marcos to put a sizeable chunk of money into shoes, compared to buying a 2nd home.

 

[W2R]

I am such a homebody, and I suspect that there are quite a few other women who, like me, always wanted the home of their dreams more than just about anything.

To me, spending discretionary money on my home is the BEST possible use of it. It is just my nature to love my home. When I awaken in the mornings and look around, or when I gaze at the view (of my backyard and fence) out of my French doors, or when I shower in the wonderful big tile shower that I always wanted, or park my car inside my nice, safe garage, or whatever, I feel special, pampered, and so privileged.

Just to keep it real, so that you don't think I am one of the high rollers here, I should mention that I checked just now and my home cost less than the median US existing home cost when I bought it. But to me, it is a dream come true and it is my Taj Mahal.

Well, maybe it isn't all THAT, but you get the idea.

On the other hand, I have known some men who really wouldn't care if they lived in a dream home, or if they lived in the back seat of a rusted out '56 Chevy parked down by the river because they don't personally value a home as much as I do. It would be silly for them to spend very much on their home.

I don't want a yacht, or even a row boat. I don't want a sports car, or a private plane, or a second home. (That's probably good because I couldn't afford any of that!) But now that I have my Dream Home, I feel like I have everything I ever wanted in life. That's a wonderful but slightly unsettling feeling.