What percent of net worth is ideal for home?

Dash man said:
Our primary home is about 7% of our net worth. We paid it off back in 2010 to get ready for retirement. Two townhomes that our two boys and their families live in total another 7%. Our two vacation homes would be another 15% total. No mortgages but lots of property taxes!
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Nice to know there are others that ended up long too much non-income producing real estate. Instead lots of carrying costs! But thankful to be debt free and able to provide family with improved living conditions and have vacation homes. Still question our decision making a bit, but you never know when your time will come, so might as well help family now while you are alive. You get to see them enjoy the benefits of your hard work instead of waiting until you’ve past on.
 
My 2 paid-for homes are about 21% of my total net worth.

The operating costs are 23% of total living expenses, as tallied up by Quicken over the past 10 years.

These operating costs include everything: taxes, insurance, maintenance, upgrade, utilities, etc...
 
NW-Bound said:
My 2 paid-for homes are about 21% of my total net worth.

The operating costs are 23% of total living expenses, as tallied up by Quicken over the past 10 years.

These operating costs include everything: taxes, insurance, maintenance, upgrade, utilities, etc...
Click to expand...


Just for fun, I once calculated my total housing costs based on opportunity cost as well as HOA dues, utilities, etc. Then I realized. I HAVE to live somewhere. So, what opportunity cost is there, really.



I suppose I could live in a blue plastic tarp on the beach, but I think I'm past that stage now.
 
Koolau said:
Just for fun, I once calculated my total housing costs based on opportunity cost as well as HOA dues, utilities, etc. Then I realized. I HAVE to live somewhere. So, what opportunity cost is there, really.



I suppose I could live in a blue plastic tarp on the beach, but I think I'm past that stage now.
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I have to agree that opportunity cost is somewhat meaningless as one has to live somewhere.
 
Stormy Kromer said:
I live in my grandpa's old farmstead built in 1873. I bought out the estate when he passed for fair cash money. I remodeled and updated myself in 2020 during covid when I lost my j**B. Well..... every 150 years or so you have to do something.

I am lucky that DW likes living here, it's a great time. The farm would be worth more if the house wasn't on it according to the appraisers. The appraisers don't pay my bills..... So I'm costing my net worth by living here. Hell, its fun.....I'm not moving to town. I'll post a picture when I figure out how.
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This actually sounds quite lovely. I surely wouldn't mind seeing a picture.
 
Koolau said:
Just for fun, I once calculated my total housing costs based on opportunity cost as well as HOA dues, utilities, etc. Then I realized. I HAVE to live somewhere. So, what opportunity cost is there, really.

I suppose I could live in a blue plastic tarp on the beach, but I think I'm past that stage now.
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aja8888 said:
I have to agree that opportunity cost is somewhat meaningless as one has to live somewhere.
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True.

On the other hand, it is understandable when someone is curious about how much he/she should spend on a particular category of the living expenses.

Say, one should not spend 80% of his budget on food/drink, and say he has to eat and drink something. :cool:

In 3rd world countries, poor people actually have to do the above, and not out of their choice. It's very sad.
 
The home I own now represented 25% of my net worth when I placed a down payment on it 17 years ago. I paid off the balance 2 years before retirement. Although the home’s value has risen somewhat, my savings and investments have grown faster, so the home’s value now represents about 10% of my net worth.
 
I never really thought factoring in a % of my NW in buying my house. Sure, I didn't buy a $25m mansion but I wanted some land and a comfortable new home for retirement. I guess I would have thought twice if it would have taken more than half of my NW, but it didn't.
 
Maybe others are different, but when we bought our first and only house in 1993, the down payment basically took all the money we had. Hence, our equity in the house represented about 100% of our net worth. 30 years later, our paid off house represents about 25% of our net worth (and the house is worth about 4X what we paid for it.)
 
NW-Bound said:
True.

On the other hand, it is understandable when someone is curious about how much he/she should spend on a particular category of the living expenses.

Say, one should not spend 80% of his budget on food/drink, and say he has to eat and drink something. :cool:

In 3rd world countries, poor people actually have to do the above, and not out of their choice. It's very sad.
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Yes, that is very sad for sure. I feel so blessed and fortunate of my life, and I never take it for granted.

The ranch and home take up ~ 15% of my NW.
 
Gumby said:
Maybe others are different, but when we bought our first and only house in 1993, the down payment basically took all the money we had. Hence, our equity in the house represented about 100% of our net worth. 30 years later, our paid off house represents about 25% of our net worth (and the house is worth about 4X what we paid for it.)
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That was my experience as well - down payment and closing costs basically ate up 95% of NW. Fortunately % went down rapidly from there. In retirement, expect home equity to comprise less than 10% of NW.
 
Our first house ate up all savings, we even had to borrow some from my BIL, so the Home equity vs. net worth was virtually 100% home equity.
Upon moving five years later it represented 20%, and now ten years after buying a new home it is about 10-12% thanks to the recent runup.
 
I don't really know how this is relevant other than perhaps interesting so I'll play. My current house value (likely market value)/Liquid NW plus house value is about 18%. Four years ago when I purchased it it was about 21%. Hopefully it will continue trending down due to portfolio growth.


I went back and looked at my first house. I bought it for $125K when my NW was $77K and I sold it 10 years later for $142 (rode the bubble up and back down!) when my NW was $653K (~22%). 10 years later it's now worth ~$550K; with hindsight, I wish I kept it but the ex didn't like it so we moved on to the money pit.
 
My paid for home is probably around 20% NW. I never paid much attention since the house isn't large just comfortable and I have to live somewhere. The location (region, state, city, and neighborhood) is what is really important to me.

Cheers!
 
To provide an update -
We are selling our home and moving to TX from IL and plan to buy a home. So we will be in an all-cash & investment position. This is year 3 of retirement, at 53 - no pensions, etc.

We were looking at what people would consider ideal % of NW for home.

We’re looking at areas that is strong seller market due to absurdly low home inventory. Homes that are turn key, move-in ready sell within a couple days with multiple offers.

We will not overpay, and will not pay the spike in price.

We’ve made offers on 2 homes that we’re not even in turn key condition, needing significant work. Both of these had multiple offers (after our bid - agent told others who had viewed, and turned it into bidding.). We were out bid on 1, and other had significantly more issues that were seen in inspection process that sellers would not compensate. These would have been around 25% of NW.

We’re on attempt #3. This one is closer to 12%. Sellers Agent is trying to get earlier showing clients to bid to bring up price. Ugh.

It is very frustrating that agents can do that. There is not an acceptable “expiring” offer or other situation to disallow this process. You can not legally put an expiration on the offer - against the contract language - sellers have a week. Asked multiple agents, etc. It is the norm in this extremely tight home inventory sellers market. You can, technically, formally withdraw an offer - but it is greatly frowned upon and generally unacceptable practice.

So….we’re waiting on #3. Expect a suddenly “multiple offer” again with bidding process, yet, again…
 
I was surprised to hear about the bidding war situation. I suppose that must vary depending upon location.

Thanks for keeping us updated and good luck with your move.
 
For a reference on supply - in an areas that we are looking - about 300k+ population. With very limited filters - there are about an average of 7 homes available in a 500k price range. Local area consider this a red hot sellers market - due to inventory. Probably 3 of those 7 have been on market for more than 6 months and are double price from currently selling homes - and those 3 are in bad condition. So realistically - 4 homes….

We’re leaving an area of 40k population with about 8 homes with those same filters in just a $100k price range. Current home is in a balanced market.

So - double homes, in 1/7th the population in comparison - so it’s like they need 15x homes available to bring market to balance.
 
retire48in2018 said:
We’re on attempt #3. This one is closer to 12%. Sellers Agent is trying to get earlier showing clients to bid to bring up price. Ugh.

It is very frustrating that agents can do that. There is not an acceptable “expiring” offer or other situation to disallow this process. You can not legally put an expiration on the offer - against the contract language - sellers have a week. Asked multiple agents, etc. It is the norm in this extremely tight home inventory sellers market. You can, technically, formally withdraw an offer - but it is greatly frowned upon and generally unacceptable practice.
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I'm lost. Who can't put an expiration on the offer? The buyer??

We bought this house three years ago and wrote in the offer that it expired in 24 hours. We had a couple houses we liked and wanted to move on to the next if this one wasn't to be.
 
Same here. As buyers three years ago, we wrote the offer to be good for 24 hours. If we didn't hear back either way in 24 hours, we moved on. In that case, they countered within the 24 hours, we countered, they accepted and it was a done deal.
 
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Our house, fully paid for and probably our forever home is 11% of our NW. The floorplan, location, and neighbors are kind of perfect. We're within walking distance of the university's sports arena. It's a quiet tree-lined neighborhood. No McMansions anywhere in sight. Simple brick ranches and two levels. Parks and grocery stores are also within walking distance. It's the Midwest. Temperatures and rain are nice. It's in the 70s this week in August. No complaints.
 
According to the realtor and the contracts here - sellers get minimum of 2 calendar days. You can not put an expiration on contract - but verbally inform. After 48, you can submit a formal withdrawal.

You can not submit another offer to a 2nd home (unless you can afford both) until you formally submit a withdrawal.

I have bought and sold 9 homes in other areas - never heard of this until here.

The realtor organization has the right to suspend a realtor who attempts a non-standard 48 hours here
 
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