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Should your home be a big part of your net worth?

{ 47 comments }

home equity should not be a large part of your net worth

A few days ago, I got a question from one of our readers.

My biggest question, as I’m retired in my 40’s but my husband still works, is how much can I spend on a house. What % of my assets is wise to invest in a house that we hope to live in . . . maybe forever.

That’s a great question! Obviously, there is no exact answer to this question because every situation is different. In your 20’s, you probably rented or just purchased your first home. At this point, the home equity/net worth ratio is probably quite low. As you get older, you’ll accumulate more home equity and it should grow as you get closer to retirement. Hopefully, your home will be paid off by the time you fully retire. This will help reduce your monthly expense in retirement.

Let’s take a look at why your home equity shouldn’t be a large percentage of your net worth, and then I’ll share my numbers. I’m 40 and semi-retired, so I think our situation is pretty similar.

Definitions

Home equity – The value of your home minus what you owe on the mortgage.

Net worth – The sum of all your assets minus liabilities.

Why your home equity/net worth ratio should not be too high

There are many reasons why your home shouldn’t be the bulk of your net worth. Let’s see if I can get most of them.

  • Liquidity – You don’t want a large part of your money to be locked up in your home. What if you need a large amount of money quickly? You can take some cash out with a home equity loan, but that usually takes at least a month. It can also be difficult to sell your home at the price you’d like if the housing market is not optimal. Even in a seller’s market, it takes at least a month or two to sell.
  • Opportunity cost – Historically, stocks have returned 8% annually over the long term. Real estate is much more difficult to quantify. Various sources estimate the return to be anywhere from 1 to 5% annually. If you take the expensive transaction cost into account, then the return would drop quite a bit as well.
  • Diversity – You shouldn’t put all your eggs in one basket. Ideally, you should have some stocks, real estate investment, home equity, bonds, and cash.
  • McMansion – If your home equity is a large percentage of your net worth, it could be an indication that you are living beyond your means. Or maybe you just spent too much on a house. If your net worth isn’t that high, then you probably shouldn’t get a McMansion.
  • Cash flow – An expensive home usually means a bigger monthly bill. Property tax, utilities, and maintenance tend to be higher with a more expensive home.

Did I miss anything? Let me know and I’ll add it here.

RB40’s ratio

Currently, our home equity is only tiny fraction of our net worth – less than 1%. I just checked Zillow and our condo hasn’t recovered from the housing meltdown yet. There were a lot of foreclosures in our complex and that drove the price down quite a bit. The inventory is much less now so I’m hoping the price will recover soon. Right now, our home equity is only a little higher than what we have left on our mortgage. That means we don’t have much home equity at all.

Actually, I think Zillow underestimated the price of our condo by quite a bit at $260,000 (this is what I used to derive the 1% number.) I think we can probably get at least $300,000 for it if we decide to sell. Anyway, 1% isn’t a realistic answer, so let’s look at our next home.

Future home

As some of you may know, we are selling our 4 plex and rental home. We plan to do a 1031 exchange into a rental home with the possibility of converting it to a primary residence in the future. We have been house shopping a bit and the price is quite high in the area we like. The inventory is also very low and we haven’t found a place we really like yet. If we don’t find a good property, we’ll just invest elsewhere.

If we find a house in the area we like, then we’d probably stay until our kid graduates from high school. That’s 15 years so it’s a substantial period. Of course, life never turns out like you plan so who knows what’s going to happen. Anyway, I’d be comfortable with putting 20 to 25% of our net worth into a primary residence at this point in our life. This will enable us to get a reasonably sized home in a good school district. We would still need a mortgage, but not a huge one.

I wouldn’t want to put more than 25% of our net worth into a house. It’s just a lot of money to be locked up in one place.

What’s your ratio? – Poll closed

So what’s your home equity/net worth ratio?

home equity as ratio of net worth

 

If you’re buying a dream home where you plan to live forever, how much would you be willing to put down? 

track your net worthSign up with Personal Capital to help keep track of your income and net worth. Personal Capital is geared for investors and have many great tools. See my review of Personal Capital and how they helped me reduce my investment fees.

 

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{ 47 comments… add one }
  • MrsFinancialFreedom May 28, 2014, 2:04 am

    A lot of my net worth is tied up in my current primary residence and even though its not ideal, at least it allows me to only have a very small mortgage. I know this is not the best situation so for the past year I’ve been putting more and more money into the stock market but its a mere drop in the ocean compared to what equity I have in my house.

    In the UK, I think most people have a lot of their net worth tied up in their house as property prices have risen so much in last 20 years. I think people still feel safer putting the majority of their money into property than the stock market.

    • retirebyforty May 28, 2014, 1:40 pm

      Thanks for your input. The location can make a huge difference. Our area is somewhat expensive compare to the rest of the US, but it’s still much cheaper than California.

  • John C @ Action Economics May 28, 2014, 4:15 am

    Approx. 38% of our net worth is in our primary residence, and 25% is our rental house. We put owning a home higher in the priority list than saving for retirement. We are now shoveling cash into our retirement accounts so these numbers are quickly dropping. about 3 years ago our net worth was about 90% in home equity between the 2 houses. Even with the goal of paying off our primary residence in 8 years, I see at the 10 year mark home equity between both properties will be under 25%. We don’t plan to move again so over time it will continue down, and maybe get down to that awesome 1% mark!

    • retirebyforty May 28, 2014, 1:42 pm

      Great job with your retirement account. I’m sure it will catch up to your home equity soon. Good luck getting it to the 1% mark. Hopefully by increasing your other accounts. 🙂

  • Hubbard May 28, 2014, 4:21 am

    Less than 1% of your net worth is in your home?! Did you forget a zero in there? By my back of an envelope math, if Zillow thinks it’s worth $260,000, then your net worth is over 26 million.

    • retirebyforty May 28, 2014, 1:43 pm

      Home equity, not home price. 🙂 I wish I have $26 million.

      • Steve May 28, 2014, 3:53 pm

        This sentence uses “equity” when you probably meant value or estimate: “Right now, our home equity is only a little higher than what we have left on our mortgage. “

  • bill May 28, 2014, 6:12 am

    A lot of times it really is out of your hands. Our house has almost doubled in value since we bought it 12 years ago in the Bay Area.

    • retirebyforty May 28, 2014, 1:44 pm

      That’s true for for your area, but I don’t know if that’s true for the rest of the country. The Bay Area is kind of crazy with the properties. I know someone who had several 4 plexes and they are multimillionaires now.

  • Wilson May 28, 2014, 7:16 am

    I don’t really track my home as a percentage of net worth b/c once it’s purchased the circumstances are often out of your control and it’s not liquid, i.e. “funny money”. So what if I could sell my home now for a nice profit? I still need a place to live, and rents are increasing commensurate.

    Now I have been contemplating how much I would be willing to make for a down-payment on a new abode and renovations. I’m definitely not comfortable with more than 25%, in fact that percentage is making me nervous. I think more like 15-20% is less stress inducing, with spacing out various renovations over a period of years. Where I’m at it seems to me that everything is getting overpriced in the neighborhoods we’d prefer, so it wouldn’t be too wise putting too much money into a house now.

    • retirebyforty May 28, 2014, 1:46 pm

      I don’t track the ratio either. It’s not very useful, but I’m curious to see what our readers numbers are.
      25% is quite high. I don’t really want to put that much down either, but that’s probably what we’d have to do to get into the neighborhood that we like and keep the mortgage payment low.

  • My Dividend Pipeline May 28, 2014, 7:34 am

    Interesting topic. Since I have no mortgage, car loans, or consumer loans, my net worth is solely dependent on my assets. While there are many types of assets, I focus on the ones that deposit money in my checking account each month so I can pay for my expenses. The “investments” that don’t deposit money in my checking account each month I view as speculation or even worse liabities disguised as “assets”. Relying on speculation to cover necessities is not a good strategy my humble opinion. Therefore, I think your house should be less than 10% of your overall net worth.

    Just my $.02.

    MDP

    • retirebyforty May 28, 2014, 1:47 pm

      I like the way you look at it. I usually do that too. Anything that put cash in your pocket is an asset. Anything that take money is really a liability. 10% is good, but I don’t think we can pull that off in the area we like. The houses are pretty expensive in Portland now.

  • Kenny May 28, 2014, 7:44 am

    Home eventually becomes a big part of the financial equation, BUT, if you have played your own Wealth Creation well, then the ratio should remain almost within a tight range for your life.

    Young: $100K house vs Net Worth $250K

    MidLife: $250K house vs Net Worth $800K

    Late Life: $400K House vs Net Worth $1.5M

    Something along these lines……My ratio is closer to single digits or teens right now, and the rise in the markets is helping reduce the ratio.

    Kenny

    • retirebyforty May 28, 2014, 1:49 pm

      I agree! Your net worth should increase instep with your home equity. Actually probably should outpace it if you’re saving and investing consistently.

    • Steve May 28, 2014, 4:11 pm

      Only if you continually ratchet up your standard of living by buying more expensive houses as you go along.

  • Justin @ Root of Good May 28, 2014, 8:02 am

    Around 12% of NW is the house. I don’t consider it an investment at all, and in fact, it’s a liability to some extent. The main benefit of course is not paying rent. However taxes, insurance, maintenance and utilities all add up.

    I think buying a modest house was a huge factor in us hitting FI and retiring at 33. If we lived in neighborhoods where many of our coworkers live, we would have an extra $1000 on the mortgage payment, plus another $100/month for insurance and probably $300/month more for taxes. Then add in HOA dues, higher maintenance and utilities costs for a larger house, etc.

    All together, we probably saved $15000-20000 per year (after tax) by choosing a somewhat modest house (is 1800 sq ft and 4 bedrooms on 1/3 acre lakefront lot in the city modest?? 🙂 ).

    Add $15000 for 10 years and invest it at 9% return, and you end up with a quarter million dollars. In other words, we could buy another house or two with what we have saved by living in our lower cost house. Or apply the 4% rule to the quarter million $ and we have an extra $10,000 per year to live on!

    So to answer your question, Joe, no, I don’t think houses should be a big part of your net worth if you want to grow wealthy and reach FI.

    • retirebyforty May 28, 2014, 1:50 pm

      I don’t consider it an investment either. It’s just a place to live. 12% is great!
      It’s tough to buy a modest house in the area we like. Your modest home sounds pretty nice. 🙂 That kind of property here would cost over a million or maybe 2…

    • Steve May 28, 2014, 4:11 pm

      This was one of the few bits of reasonable writing in this entire discussion (including the original post). It doesn’t matter what percentage of your net worth your home equity happens to be at any given moment in time. What matters is keeping your costs modest, and saving the money you didn’t spend.

  • peter May 28, 2014, 9:53 am

    If your home is 300k, the equity is a little higher than what you have left on your mortgage, which is 1% of your networth, your networth is 15m.
    Congratulations

    • retirebyforty May 28, 2014, 1:52 pm

      Umm… Maybe I need to rephrase that. My editor went to bed early last night. I’m just saying our home equity (home value – mortgage) is pretty low. I used $260,000 as the price.

      • peter May 29, 2014, 9:14 am

        Yes, that’s makes sense.

        Home value = $260,000
        Mortgage = $123.000
        Equity = (home value – mortgage) = $127,000
        “home equity is only a little higher than what we have left on our mortgage”

        All other assets = $400,000 = X
        Equity – mortgage = $4,000 = Y

        Y/(X+Y) = 4,000/(400,000+4,000) = 0.99%
        “Currently, our home equity is only tiny fraction of our net worth – less than 1%.”

        I would think it’s more like:

        127.000/(127.000+400.000) = 24%

        where 127,000 = Equity = (home value – mortgage)
        and 400,000 = all other assets

  • Ginny May 28, 2014, 11:41 am

    We paid off our house last year when my husband became ill. I would much prefer the peace of mind it has given him than being considered with the net worth ratio.

    • retirebyforty May 28, 2014, 1:53 pm

      I value security more as well. Yeah, this ratio is just for fun.

  • Dave May 28, 2014, 3:34 pm

    A home equity line of credit, once arranged, does not take a month to access. I used to just write a check, to draw on ours. Our HELOC let me feel more comfortable with a smaller emergency cash cushion. Equity in a house is “dead money,” in that it earns a zero rate of return. You can control the ownership of your house for the cost of the down payment and mortgage payments, using the rest of the cash for something more productive (while taking a tax deduction for mortgage interest). I think prepaying our initial mortgage kept us from doing a lot of other things with that money. Thanks.

  • kim May 28, 2014, 5:01 pm

    how about purchasing a home for cash during retirement years I don’t plan to work but I will receive a pension? sometimes you gotta wonder if its just wiser to rent?

  • 1stuhave2findthetunnelb4ucthelight May 28, 2014, 7:43 pm

    I understand the basic argument. Don’t tie up funds in your house that you could make more money invested in the stock market or other investment that pays more than your mortgage. “Investing the spread.”

    There are some flaws in the argument.

    First, getting the high return comes a risk, and while the stock market seems so positive with all time highs, things can change. One doesn’t know if you’re funds could take a significant hit at a time in your life when you don’t have time to try to wait out a market recovery. When do you pull out of the market? 50 yr old, 60 yr old, 70 yr old, 80 yr old?
    What if you make other investments with the funds and they don’t turn out good? (Do investments ever go bad?)

    Second, what if you truly need a very large sum of money that isn’t an optional expense or investment (especially if market’s in a downturn/correction)? I suppose an example would be uncovered medical costs/deductibles for large health care expense, long term care needs (even if for temporary period), an uncovered/underinsured law suit for a rental property, etc. What if you depleted those funds and you are retired/semi-retied? How do now cover the basic expense of keeping a roof over your head/family’s head?

    Ultimately, especially as we get older/into retirement you don’t want a “house of cards” that can fall apart. Rental properties with no equity and no renter, primary residence mortgage with no job and your “liquid funds” depleted, etc. 1st you be losing the rental property, then it could be your primary residence.

    It seems most logical to have your primary mortgage paid in full to give some foundation. I suspect the yearly amount is $10K to $20K year for the interest alone that you’re can’t avoid unless you sell your house quickly or even give up and lose any equity you built up over the years. If you end up having to live on your social security alone for unforeseen reasons, it’s pretty hard to pay that basic mortgage payment.

    Could you have made more money “investing the spread” on interest rates/returns? Good chance that’s yes, but the option of a “no” to that question puts you in a good deal of jeopardy in your older retirement years.

    I thought one of the reasons/goals of retiring is to have a good quality of life, not worrying about losing the roof over your house or not worrying about the mortgage.

    If your out of liquid money, max out your credit cards and default on those (I could easily get access to 100K that way). You should now qualify for Medicaid/food stamps, or take a reverse mortgage on that paid off mortgage. At least you aren’t trying to get on/find section 8 housing which may possibly entail a move/location that you’d not want to live. Could you qualify for socialized subsidies if you have a “decent” income coming in from your investments?

    I’ve seen a few people live using not much more than there social security because they at least own the house they live in. Take that $10K-$20K year on your mortgage payment and add it to social security and while not a lavish lifestyle, you can probably get by on the basics. Ironically, some of these same people have homes that appreciated significantly, but choose to stay put where they have friends/family vs. casing out on their homes and moving somewhere else less where housing is more affordable. Also, for lack of political correctness, they are old. Any many older people hang around the house, not spending much money, not out every night going to restaurants, not taking big trips because they don’t even like to travel that much anymore. Won’t happen to you?

    And anyway, who says capital gains taxes will stay low in the future?

    • Dave May 28, 2014, 8:34 pm

      This certainly is a very negative, dreary outlook. It seems like mentioning locusts, and the possibility of nuclear fallout, would not be out of place in your post. If you pay off your mortgage above all else, you can be house-rich and cash-poor. I would not want to tie up all of my wealth in my house. A house is a liability; where a liability is defined as something that takes money out of your pocket, and an asset is something that puts money into your pocket. (Courtesy of Kiyosaki’s Rich Dad books.) We’ve established our “foundation,” as you mentioned, but now we will seek to put that equity to use to grow more assets. The return on invested capital stored as equity in your home is zero. Zero for year after year after year you leave it there. The housing market could decline, a factory could be built next door to your home, etc. Owning only one asset makes you more vulnerable. Diversify out of that asset by putting the equity to work in another asset. Just my $.02.

      • peter May 29, 2014, 9:27 am

        A very valuable 2 cents is that.

        Surveys indicate that the poorer you are the more of your holdings are in real-estate, followed by gold, followed by cash, followed by stocks/bonds.
        Not to say that rich folks are make no mistakes, but that’s the side you’d want to be.

      • Erich June 5, 2014, 8:59 am

        It’s ironic that people think of a house as an investment, when the only benefit is reduced (not eliminated) housing expenses after taking 25-30 years to pay it off. The only beneficiaries to its increased value will probably be those who manage your estate. It’s actually really bad for you, if your house appreciates astronomically over time. My grandfather-in-law’s annual property taxes were more than he paid for the house by the time he passed away, never mind maintenance costs and bills (started with oil heat which was expensive to remove and no a/c). Crazy.

        • retirebyforty June 6, 2014, 9:20 am

          Actually, we have a property tax cap here and it’s going up 3% no matter what.

  • Ray Y May 29, 2014, 2:32 am

    Counting your home in your networth is a bad idea, especially if your home is high in value and you have a large amount of equity in it. It’s worse than dead money since the higher the value, the higher the expenses. Also, your home equity is not liquid and is not divisible. It’s not like other assets where you can sell off a small portion if you needed to.

  • I’m a renter, but I imagine my home would definitely be by far my biggest asset if I bought one.

  • Joe May 29, 2014, 6:24 am

    I don’t consider my home as part of my net worth due to the fact that I believe that my primary residence will never be an asset but a liability. An asset should put money into your pocket while a liablity takes money out. Using that analogy, my primary residence will always be a liablity in my mind even if it is paid off (I will always have insurance, property taxes, repairs, etc.).

    However, I consider my small rental home which has positive cash an asset and therefore include it as part of my net worth.

  • Josh May 29, 2014, 4:45 pm

    I would say the percentage of net worth of a home should depend on one’s age range. If you’re in your mid 40s to mid 50s, for the vast majority of middle class and somewhat affluent people, it’s so much better to pay off your home and have a place to live without rent/mortgage rather than trying to invest in the market. If one is very affluent, probably $5 mil and above in net worth, the question is really moot since that person is already very rich. However, it’s still better to pay off mortgage rather than try to invest. I live in the Bay Area and if I had one million extra cash, I’d pay off my house first in a heartbeat even with the low interest rates. The market can swoon 30% to 50% easily and take decades to recover.

  • No Nonsense Landlord May 29, 2014, 8:25 pm

    I count my home, after all, it could be sold. I do not count cars and furniture. Used furniture is hard to give away.

  • 1stuhave2findthetunnelb4ucthelight May 29, 2014, 10:46 pm

    Not sure who’s say’s tie up ALL your wealth into one’s house? Like everything else in life, balance is important and obviously having other investments like mutual funds/401K’s, etc are all part of the balance. I think a house is a liability and bad investment for many people, such as those likely to move, unsecure type of jobs, even younger ages. But I must be an odd person, as having the security of a paid off house as one goes into retirement/older age, seems a reasonable trade off over continuing to put most of your funds into the market as you get older and lose the ability to ride things out if there’s a downturn.

    I’m not sure how one can not include paying rent into the equation when it comes to having to pay taxes/insurance/maintenance? Paying rent to have a roof on one’s head is a “liability” and your still paying taxes/insurance/maintenance, but just indirectly through your rent payment. Last I checked, paying rent didn’t magically put money into my pockets? I personally don’t plan on moving in with my kids house as a retirement plan.

    One must have a pretty negative outlook on owning a home as less of a positive aspect in one’s life over the long term. I’ve always had positive intangible experiences with owning home(s) or from growing up in an owned home. I guess today’s retiree’s want freedom to up/move rent wherever they choose without the burden of owning home?

    I believe one of the main causes of bankruptcy is due to unforeseen health issues. Don’t have the statistic/source on that, but believe that’s likely true. Is it negative to not ignore that issue? Maybe I work with too many old/sick individuals and know they likely never thought when they were in the 40’s/50’s that they’d get sick, have a stroke, etc.

    And a quick post above pointed out how unforeseen health issues can change one’s situation, “We paid off our house last year when my husband became ill. I would much prefer the peace of mind it has given him than being considered with the net worth ratio.”

    So I don’t worry about locust and nuclear fall out because those are pretty idiotic concerns.

    Life insurance for your loved ones to have a quality of life if you were to pass away and long term health insurance must be pretty negative views of life. Why get them, no one ever dies or gets sick . . .

    My elder/retired parents must hate living in the “liability” of the home they paid $60K for, raised a family there, and are still enjoying their retirement. That damn liability is worth over 1.5 million and $500K is tax free should they decide they want to cash out. They could rent, but it would cost them $3+K more a month over the taxes/utilities/no mortgage to live in such a nice neighborhood (but who cares about those things?) When they both pass, unfortunately, the kids will have to inherit that liability.

  • peter May 29, 2014, 11:43 pm

    Fern Gln, La Jolla, CA 92037

    Zillow estimates this at $1,200,000 and rental at $3,800/m

    If you a mortgage payment of $3,800/m, you need you have a down-payment of $460,000 with a 20 year term and 3% interest rate.
    In 20 years, that home is yours, debt-free.

    Now let’s assume you rent that home instead and put that $460,000 in the SP500 index or the Dogs of the Dow.
    At 5%, that would be $1,162,000 but not a home-owner
    At 7%, that would be $1,663,000 but not a home-owner
    At 9%, that would be $2,450,000 but not a home-owner.

    It’s possible that Fern Gln, La Jolla, CA 92037 will sell for $3,000,000 in 20 years’ time and you’d wish you had made that down-payment on home instead of the Dogs of the Dow.
    It’s also possible that Fern Gln, La Jolla, CA 92037 will sell for $2,200,000 and you’d have $1,000,000 more than what you put into it but you’d wish you’d been a renter and had benefited from 9% Dogs of the Dow.

    In the meanwhile, no liquidity as a home-owner of 20 years and abundance of it as a renter.

  • Mom @ Three is Plenty May 30, 2014, 6:40 am

    We have ~18% locked up in our home equity – and we have a little more than 20% equity in the house – just enough to avoid PMI or a double mortgage. We’re pretty sure that this is not our “forever home”, but if it were, I’d focus on paying it off and making it a slightly larger percentage, just to not have a payment in the future.

  • Scott May 31, 2014, 9:50 am

    Our house is about to be 0% of our net worth as we close escrow next week on the sale. Zillow thinks it’s worth $900k but we got $1,075,000. Maybe they can’t keep with crazy California real estate prices?

  • 1stuhave2findthetunnelb4ucthelight June 2, 2014, 9:24 pm

    Here’s a good article that came out in the NY times:
    http://www.nytimes.com/2014/05/22/upshot/rent-or-buy-the-math-is-changing.html

    Lots of comments/feedback that is interesting.

    Either way, having a primary residence and with rental properties in good areas, I’m good with people wanting to rent for 20+ years.

  • Luke June 6, 2014, 4:23 pm

    Many people talk about the better returns of shares over real estate. However they all miss one key point. Most people that invest in real estate have a sizeable mortgage. With real estate you aren’t just making a percentage return on your initial investment like you do with stocks. You make a return on both your equity and the amount you borrow. Yes, this can work against you in a falling market. However if the average return on real estate is 1 – 5%, you can turn this into 10 – 50% if you take a 90% mortgage on the property. This beats stocks by a country mile.

    • retirebyforty June 7, 2014, 1:54 pm

      Yeap, leverage is the key to real estate investment. The main problem is the high transaction fee.

  • Allan June 24, 2014, 9:31 am

    I also see a few things that people are missing. So in the house vs. rent debate, its easy to compare the two, but one thing we know is rents almost always go up, and once you lock in a house, there are no increases.

    In the payoff your mortgage vs. leverage all you can debate, it comes down to an issue of can you get back the interest you are paying with your investments? Look at the interest rate you are paying and ask yourself if you can make that guaranteed? That would be pretty hard in today’s low interest rate environment. You could invest in stock and make more, but increase risk means you can lose money as well.

    And there is one more thing not discussed much here. There is a good chance in your old age that you or a spouse will need long-term care. You are buying long-term care insurance right? We’ll, a paid off house is great long-tern care insurance. The value of a house will grow with inflation, and should you or a spouse need long-term care, you can sell the house and pay for it. If the other spouse doesn’t need it, no problem, there will be money left to pay for rent for a long time, then long-term care should they need it. (Oh, did I also mention that the profit from your primary home is tax-free?)

    I do not consider my paid-off home in my “net worth,” but I look at it as my means for a lifetime of free rent, and my long-term care policy. Could I do slightly better by renting and investing the money? Maybe but or maybe not, but the piece-of-mind in having it, priceless.

  • Ted Hu August 11, 2014, 4:04 am

    Agreed the oppty cost just isn’t stock market returns. S&P 500 was flat throughout 2000s. Chart it to believe it.

    The oppty cost is cost of alternative housing. In today’s record low interest rate environment and favorable tax treatment for homeowners, it’s a bit dogmatic to deride housing when everything else is far more volatile cost and return wise.

  • Auke August 22, 2014, 6:02 am

    Home equity – The value of your home minus what you owe on the mortgage.
    Net worth – The sum of all your assets.”
    look like flawed definitions to me (and wishful thinking……).

    I would say:
    Home equity = value of the home you own
    Net worth = Assets minus liabilities

  • chris September 25, 2016, 8:00 pm

    I own my house outright. I bought it in cash for 235,000 and now on Zillow it is estimated at 450,000. I have 50,000 in checking account making nearly zero. Since it isn’t making money I should not include it as net worth because it is not generating income? Also I have property tax tomorrow and it is 3500. OK my networth went down to 46500 tomorrow. My house is still worth 450,000. Yes my net worth is going down but by my pay check is due at end of month for 5000 after taxes. Oh and the renters net worth goes down every month too after he pays his rent. I will be selling my house at the end of the year and will rent like the rest of the losers except I will have 400,000 cash after the sale. So me with job and the renter with job both renting now at the complex except I have money from sale of my house.

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