How much of your net worth does your home represent?

[lhamo]

Our apartment value currently constitutes 66% of our net worth. But that is because we bought at the bottom of a dip in the local market and the value has gone up more than 3x what we paid in the past 5 years. We couldn't/wouldn't ever pay that much for a property. But we do love it, and so while we decide to stay in Beijing we are keeping it -- cheaper for us to live here than to rent, actually (more than half of our mortgage payment is going to principal at this point, and DH's housing allowance offsets much of the rest).

I do call it our "lottery ticket in the sky", though, and am trying to convince DH we can cash it in and FIRE. Waiting for his buckets-o-work-frustration to fill to the same level as mine.

 

[jkern]

I can provide an example comparing my parents house and mine. Parents bought in 1968. They paid 28K. House is now worth about 1.3 million. They pay just over $1000 in taxes. If their house sold today a new owner would pay 1st in taxes.
We bought our house many years later for 300K. House is now worth about 8 5th (yes, we live in the low rent district!). We pay 6K per year in taxes.

In terms of us, our house equity is about 35% of our net worth. But meaningless for retirement planning because we don't plan to sell. And given I have no idea how to quantify the value of our pensions the number is even more meaningless.

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My mother bought her home in San Mateo in 1968 for $26K. Today that house is worth about $750K to $800. The assessment is $77K, which is about a 10 to 1 ration to current value.

 

[fritz]

About 16% of net worth w/o any consideration for SS (no pensions).

 

[bmcgonig]

Good lord. I'm at the high end. House is approx 50% of net worth not incl SS. I live in Marin , Bay Area. It's paid off and I don't consider it as a "spendable" asset but if I meet one of those bad sequence of returns that we all worry about when I retire it I can sell it and move down and still be fine. So it's a good insurance policy against disaster.


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[Lucantes]

23% of NW currently.

 

[TrvlBug]

That sounds a little suspect. That would mean that your house appreciated a factor of 2.3 from 2006 to 2014. The vast majority of the Bat Area has just got back to the highs of 06 and 07. Maybe there are a few homes (located next to Google) that have done that, but that is not common. My house is no more than 5 to 10% more than it's 06 value.

Nope, not suspect. Our value is back to + higher than the 2006 highs and neighbors bought at the height and probably overpaid. They were underwater until very recently.

Edited to add: Assessments are about 17% of my taxes and I don't know how those are handled, as a % of the base 1% rate or a flat rate or a combination. We have largish assessments for elementary, high school and JC, as well as sanitation district.

 

[iac1003]

How do you add Social Security to your net worth since NW is usually assets on hand minus liabilities? Do you take the SS amount and multiple by 25-30 (years)?

Anyway about 20% if not counting Social Security, 12% if using the above calculation for SS. DH already collects SS but most of it goes to taxes since I am still working.


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[Aeowyn]

That % has changed a lot in the last 3 years.

Three years ago it was ~25%. And then we bought our retirement property - 94 acres of raw dirt that we're turning into a farm. Sold old house and moved to a temporary house about 2 miles away for our farm. The temporary house represented ~5% of net worth. We just recently finished building our dream house (at least enough to move in). If we cut off a couple acres of the farm to go with the house it would represent ~50% of our net worth. If we include the value of the whole 94 acres with the house more like 70% of our net worth.

 

[imoldernu]

Since I can't spend or invest my house, and we have no plans to sell it and then invest the proceeds while doling them out bit by bit to a landlord, I don't include house value in net worth calculations.

I do, however, think in terms of ratio - House value:investable assets. Naturally, that would be a larger percentage.

Amethyst

I DO understand the sentiment and would like to think that way, too... but:
while we would like to live where we are, reality creeps in. Living in a retirement community, one has an opportunity to see what happens to others, both older and younger than us.

We live in a regular home... one of 65 in our CCRC... Over the 10 year period we have lived here, a chance to see what happens to others. Two widows, over age 90 are still living independently. There are several couples in their eighties who still occupy a regular home. The rest is a mix of widows and widowers from age 55 to mid eighties. More important is the turnover... seeing husbands go into nursing home care or the Alzheimer's unit. Ladies falling and going into assisted living. One partner needing care, leaving the other alone... In this case, usually a move into the apartments.

So, about the reality... We are in the spend-down period, as opposed to accumulation part of our lives. Hopefully, to stay where we are, but consider the possibility of moving into the Apartments... Should we outlive our nest egg, the 30K for 2 persons in a 2BR,2BA apartment including meals, utilities, transportation etc. ... Then the sale of our home would pay for another 6 or 7 years. That would get us to age 100... and after that, who cares?

In any case, for whatever reason a move would be necessary, we consider our home to be part of our assets.

 

[mickeyd]

Not counting SS or Pension income as part of net worth, our home represents about 22% of our net worth.

.

I have never counted SS or pensions in my NW, how is that possible?

 

[imoldernu]

That % has changed a lot in the last 3 years.

Three years ago it was ~25%. And then we bought our retirement property - 94 acres of raw dirt that we're turning into a farm. Sold old house and moved to a temporary house about 2 miles away for our farm. The temporary house represented ~5% of net worth. We just recently finished building our dream house (at least enough to move in). If we cut off a couple acres of the farm to go with the house it would represent ~50% of our net worth. If we include the value of the whole 94 acres with the house more like 70% of our net worth.

Your story about buying land fascinates me. Would really like to hear more. As we live in a farming area, many of the residents of my community (CCRC) farmed right up to retirement... and now seem happy and secure, still owning and leasing their land. As an aside to this, over the years they tell me that they invested in more land, which left them relatively untouched through changes in the stock market.

 

[W2R]

I have never counted SS or pensions in my NW, how is that possible?

How do you add Social Security to your net worth since NW is usually assets on hand minus liabilities?

Try this:
http://lmgtfy.com/?q=how+to+compute+present+value+of+social+security

Good lord. I'm at the high end. House is approx 50% of net worth not incl SS. I live in Marin , Bay Area. It's paid off and I don't consider it as a "spendable" asset but if I meet one of those bad sequence of returns that we all worry about when I retire it I can sell it and move down and still be fine. So it's a good insurance policy against disaster.

Sure! Also, having spent some time in the Bay Area, I know that you are living in a beautiful, amazing location and part of what you are paying for is location. Nothing wrong with that at all. It does put you at the high end, though, something that, as you point out, might be good in your case because it provides you with a higher "insurance policy" if needed. And now you know that your choice is at the extreme upper end, which I would think/hope provides you with an interesting data point.

 

[RobLJ]

Oops; I also counted the cabin and subtracted the mortagage. Main home is right at 10%, maybe lower, maybe higher.

 

[robertf57]

Try this:
http://lmgtfy.com/?q=how+to+compute+present+value+of+social+security



Sure! Also, having spent some time in the Bay Area, I know that you are living in a beautiful, amazing location and part of what you are paying for is location. Nothing wrong with that at all. It does put you at the high end, though, something that, as you point out, might be good in your case because it provides you with a higher "insurance policy" if needed. And now you know that your choice is at the extreme upper end, which I would think/hope provides you with an interesting data point.

I've always wondered how good an insurance policy against sequence of returns risk a home really is. RE and stock market returns have a positive correlation (particularly in the recent past) and I would guess the high end is more linked......

 

[RISP]

Heh. I think I win (lose?) this one: Over 100%.

 

[Amethyst]

In our case, it's OPM, not our former employer, who is "counting on" our deaths to stop our pensions. Well, actually, it's Congress, representing the U.S. population as a whole, who wants us dead; OPM just carries out the law by sending our checks. Gosh, 300 million+ people want us to die. Makes me feel important!

I looked up the "equivalent" cost of an annuity, and was actually rather surprised that it wasn't more $$. It wasn't many millions. Anyway, I never count pension future value in our net worth [we don't qualify for SS] for the same reason I don't count home equity: we can't spend or invest it.

Amethyst

I'm guessing about 30% but we also have a COLA'd pension of the type that is virtually extinct now. If we had to buy an equivalent annuity it would cost many millions.

Suffice it to say that my former employer sincerely wishes that I would die. And soon.

 

[Ronstar]

Our house and condo combined are roughly 25% of our nw. Plans are to downsize at some point and convert house/condo equity into investment assets.

 

[W2R]

Our house and condo combined are roughly 25% of our nw. Plans are to downsize at some point and convert house/condo equity into investment assets.

Yes, looking at the poll results, it seems like 10%-20% is the "sweet spot" for ER Forum members. If I ever find my dream house, I will probably move up to that category as well.

I don't want to buy a house that is too big for me, though, being single. I can't imagine rattling around in a 3000+ square foot home all by myself.

 

[donheff]

I looked up the "equivalent" cost of an annuity, and was actually rather surprised that it wasn't more $$. It wasn't many millions. Anyway, I never count pension future value in our net worth [we don't qualify for SS] for the same reason I don't count home equity: we can't spend or invest it.

Amethyst

Years ago, when they were easy to find I got an online estimate on a joint life immediate annuity with inflation protection and it cost millions to replicate my Federal pension. Did you look at a standard annuity without COLA?

 

[MichaelB]

Yes, looking at the poll results, it seems like 10%-20% is the "sweet spot" for ER Forum members. If I ever find my dream house, I will probably move up to that category as well.

I don't want to buy a house that is too big for me, though, being single. I can't imagine rattling around in a 3000+ square foot home all by myself.

3000 SF is a lot of space that needs to be cleaned and maintained. Of course, it might be just enough to have a dedicated game room to play video games on a giant screen and have a refreshment stand in easy reach.

If you have enough money to "afford" the property, the next issue is the carrying cost. It usually, but not always, correlates to the market value. Property tax, insurance, utilities and upkeep. In our case for example, the property to portfolio value is low but the monthly $$ is very high. We were aware of this when we chose the property but is this is an expense that can't really be reduced if belts need to be tightened.

 

[NW-Bound]

... I don't want to buy a house that is too big for me, though, being single. I can't imagine rattling around in a 3000+ square foot home all by myself...

Yes, 3000 sq.ft. is too much for one person. How 'bout 1800 sqft, plus 1000 sq.ft. of deck? Of course you will need a view, mountain or water. That works out even for 2 persons.

PS. Be sure to pay more for a composite deck. I've learned my lesson. Oh, and don't forget the garage that you've always wanted. Got to have that to keep the [-]junk[/-] stuff.

 

[catman2020]

We were at about 18% earlier this year, but downsized - to same town, just smaller more 'ordinary' but comfortable place and brought our percentage down to about 9%, working on increasing non-house assets to bring it down primary home percentage to about 6% when FIRE.

 

[Amethyst]

No, with COLA. I admit, it was a higher $$ figure a few years ago. Either II've gotten old enough to make a difference, or the long run of extremely low interest rates has affected annuity prices. Yes, the word "million" is involved; but not "many millions." Less than $2M, actually.

Amethyst

Years ago, when they were easy to find I got an online estimate on a joint life immediate annuity with inflation protection and it cost millions to replicate my Federal pension. Did you look at a standard annuity without COLA?

 

[W2R]

3000 SF is a lot of space that needs to be cleaned and maintained. Of course, it might be just enough to have a dedicated game room to play video games on a giant screen and have a refreshment stand in easy reach.

If you have enough money to "afford" the property, the next issue is the carrying cost. It usually, but not always, correlates to the market value. Property tax, insurance, utilities and upkeep. In our case for example, the property to portfolio value is low but the monthly $$ is very high. We were aware of this when we chose the property but is this is an expense that can't really be reduced if belts need to be tightened.

Thanks, that is so true. Even worse, I might have to go with the state backed insurance of last resort because AFAIK no insurance companies are taking new wind and hail (hurricane) policies in New Orleans even in this 10th year after Katrina. The state insurance would add a couple of thousand a year to my insurance, at the very least, over and above the increase due to a pricier home. We have had new flood insurance maps done by FEMA that raise the flood insurance precipitously for some locations, and lower it for others, so that is something I would need to check out, too. Still, I have been making generous estimates of the increase in carrying costs, and especially now that I have more income through my divorced spousal SS benefits it seems like "all systems are go". I am also assuming quite a bit more for renovations prior to moving in, than I would probably spend, depending on the home. Everything is double checked in FIRECalc with conservative assumptions.

Yes, 3000 sq.ft. is too much for one person. How 'bout 1800 sqft, plus 1000 sq.ft. of deck? Of course you will need a view, mountain or water. That works out even for 2 persons.

PS. Be sure to pay more for a composite deck. I've learned my lesson. Oh, and don't forget the garage that you've always wanted. Got to have that to keep the [-]junk[/-] stuff.

Mountain? The highest point in New Orleans is Laborde Mountain, a stunning 43 feet above sea level:

http://neworleanscitypark.com/in-the-park/couturie-forest

Now a water view would be easier to find, but we flood so much here that one doesn't want to be too close to any water at all. Besides, there are lots of rats, nutria, dead bodies, and who knows what else in our canals; they are pretty icky.

 

[Koogie]

Currently, 0% (we rent a house in the city). When we FIRE next year, approximately 14%

Unless I can, miracle of miracles, convince DW to continue renting (but somewhere cheaper). Doing the math in our particular situation and area it is close to being a wash with owning being a slight advantage on paper. Knowing from prior experience however the inevitability of lifestyle creep and renovation fever, I'm trying to stick with renting.