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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: God or Mammon? on July 31, 2014, 02:46:45 PM

Title: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on July 31, 2014, 02:46:45 PM
Our family recently moved to the suburbs of NYC where the COL is absurdly expensive and house prices in desirable towns with good schools are very high.

Our Home Value to Net Worth ratio is 1.25 and Home Value to Annual Income is 2.5.

Age early to mid 30s.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: snshijuptr on July 31, 2014, 03:26:29 PM
Home:Net Worth ~3:1
Home:Income ~2:1

Late 20's in suburban Los Angeles.

I'm actually really proud of those numbers now that I look at them. That said we also pay a ridiculous HOA fee, but we couldn't buy under $350K unless it was a townhome. In 3 years the goal is to move to a home without HOA.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: EarlyRetirementGuy on July 31, 2014, 03:35:32 PM
Home:Networth = 5:1
Home:Income = 3:1

Late 20s in the UK. We've literally just purchased our first house this year.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: MrsPotts on July 31, 2014, 04:11:19 PM
Early 50's

Home:net worth = 1:4

Home:Income = 1:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: jwilliams0215 on July 31, 2014, 04:17:21 PM
Early 30's:

Home:Net Worth = 1:3
Home:Annual Income = 1:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: frugalnacho on July 31, 2014, 04:27:02 PM
31 near detroit michigan:

Home:Net Worth = 1:1.5
Home:Annual Income = 1.5:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: bigchrisb on July 31, 2014, 04:29:24 PM
Early 30's.  Just purchased (not yet moved in).  In Australia (stupidly high house prices).

House is 57% of net worth
House is 3.7 years income.

I have an expensive house :(

Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Heywood57 on July 31, 2014, 04:40:28 PM

NetWorth / HomeVal   3:1
HomeVal  / Income    4:1

Denver Metro
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Undecided on July 31, 2014, 04:48:18 PM
On their own, I'm not sure what these ratios tell us. For example, when I bought my house, my HomeVal/Income was 1.7:1. My income has gone up, but not as fast as the value of my home, and I'd estimate that ratio is now 2.7:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: G-dog on July 31, 2014, 05:12:55 PM
Age 54
Home: net worth about 1:4.5
Home : income about 1:1.2

Because it is a small inexpensive home....
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: solon on July 31, 2014, 05:25:22 PM
Somebody needs to be doing an analysis of all this data. The numbers don't mean much by themselves. What's the mean and median? How do the ratios change with age? With income? Etc.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Mrs. PoP on July 31, 2014, 07:45:49 PM
Current: Age 31, Florida
Home/Net Worth = 0.28
Home/Yrly Gross Income = 1.15

But when we bought the house 5 years ago at age 26:
Home/Net Worth = 2.2
Home/Yrly Gross Income = 1.7

Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: iris lily on July 31, 2014, 10:25:47 PM
Home: Net Worth  1:8

Home: Income    2:1

We are late 50's and live in the land of cheap real estate, flyover country
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Rienk on August 01, 2014, 01:28:52 AM
Another data point:
Age: 27
Home : Net Worth 4:1
Home : Income (gross) 2.5:1

The top one is improving rapidly though!
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on August 01, 2014, 04:12:38 AM
Early 30's.  Just purchased (not yet moved in).  In Australia (stupidly high house prices).

House is 57% of net worth
House is 3.7 years income.

I have an expensive house :(

early 30s and house only 57% of NW is pretty good if you ask me, esp in a high COL area
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on August 01, 2014, 04:14:59 AM
On their own, I'm not sure what these ratios tell us. For example, when I bought my house, my HomeVal/Income was 1.7:1. My income has gone up, but not as fast as the value of my home, and I'd estimate that ratio is now 2.7:1

where do you live such that home value gained 60% more than income?  is that over a very long time period?
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on August 01, 2014, 04:20:09 AM
as expected, both HV:NW and HV:Income decrease with age and increase as area's COL increases

obviously doesn't say anything about how much house one buys (relative to ability to pay), which may also be dependent on life circumstances (single vs large family, etc)

interesting to see where one stands within a demographic peer group
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Ishmael on August 01, 2014, 05:47:21 AM
40.

Home : Net Worth = 1 : 5
Home : Gross Income = 2 : 1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Cromacster on August 01, 2014, 06:08:06 AM
Age 27

Home/NW: 1:1
Home/Income: 2:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: JGB on August 01, 2014, 06:10:29 AM
Age: 31.9
FIRE ETA: ~3 years

H : NW = 1 : 2.5
H : I = 2 : 1
H : Mortgage = 1.3 : 1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on August 01, 2014, 06:18:19 AM
It's also probably obvious but the Home:NW and Home:Income ratios and time to FIRE are probably highly correlated (i.e. the lower the home value as % of net worth and income, the quicker one could retire)
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Cromacster on August 01, 2014, 06:31:24 AM
It's also probably obvious but the Home:NW and Home:Income ratios and time to FIRE are probably highly correlated (i.e. the lower the home value as % of net worth and income, the quicker one could retire)

Yes, they are probably indicative of ones ability to FIRE.  Unless one does not own a home, in that case both are 0.  Overall, the biggest indicator is still going to be savings rate.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: odput on August 01, 2014, 06:52:40 AM
Age 29

H:NW  =  1.5 : 1
H:I  =  1.1 : 1

Never really though about/calculated that before...we did a pretty reasonable job buying a home last year given that "they" normally say an affordable house purchase price is ~3X income
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: former player on August 01, 2014, 06:58:28 AM
Age 54
Home: net worth   1:3.6
Home: income   14:1

Because I am retired.


On their own, I'm not sure what these ratios tell us. For example, when I bought my house, my HomeVal/Income was 1.7:1. My income has gone up, but not as fast as the value of my home, and I'd estimate that ratio is now 2.7:1

where do you live such that home value gained 60% more than income?  is that over a very long time period?

London?  Not very long?
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: God or Mammon? on August 01, 2014, 07:17:15 AM
Age 54
Home: net worth   1:3.6
Home: income   14:1

Because I am retired.


On their own, I'm not sure what these ratios tell us. For example, when I bought my house, my HomeVal/Income was 1.7:1. My income has gone up, but not as fast as the value of my home, and I'd estimate that ratio is now 2.7:1

where do you live such that home value gained 60% more than income?  is that over a very long time period?

London?  Not very long?

London house prices have seen some of the largest and fastest appreciation in the world
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: ToeInTheWater on August 01, 2014, 07:26:49 AM
age: 53

Home:Net Worth   1 : 4.2
Home:Income:  1.3 : 1

b
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Undecided on August 01, 2014, 07:41:39 AM
On their own, I'm not sure what these ratios tell us. For example, when I bought my house, my HomeVal/Income was 1.7:1. My income has gone up, but not as fast as the value of my home, and I'd estimate that ratio is now 2.7:1

where do you live such that home value gained 60% more than income?  is that over a very long time period?

That's in two years. Western U.S., fairly high-end house in a desirable town, buying at pretty much market bottom four years after a market collapse; my best view is that prices on comparable homes have increased about 55% in that time (Zillow actually estimates our home value to have increased 75% in that time, but my best estimate is more conservative).
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: dude on August 01, 2014, 07:56:41 AM
age: 49
Boston area
~5 years to FIRE

home:NW = .5:1
home:income = 2.2:1

(NW does not include the value of expected pension ~5 years, which bumps it up quite a lot)
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Mister Fancypants on August 01, 2014, 09:30:15 AM
Also a NYC suburb late 30's

Our house value is 65% of our net worth (only 35% of our assets our only liability is our mortgage)

Our income is 28% of our house value


Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Cpa Cat on August 01, 2014, 09:37:01 AM
Age 31/38; KS.

Home to net worth: 1:10. (net worth is 10 times my home value)
Home to income: 2.5:1 (income is roughly half my home value).
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: davef on August 01, 2014, 09:43:59 AM
Not sure I understand this.
Everyone seems to be expressing diffrent things.
Are we talking
ratio of home equity:net worth or home value:net worth?
What is the income ratio comparing?
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Cromacster on August 01, 2014, 09:49:42 AM
Not sure I understand this.
Everyone seems to be expressing diffrent things.
Are we talking
ratio of home equity:net worth or home value:net worth?
What is the income ratio comparing?

I believe most of the ratios are as follows:

Ratio of Home Value to total Net Worth.
Ratio of Home Value to Income (I used gross, but others may have used Net).

Though to your point of equity vs value.  The amount of equity would typically be included in your Net Worth.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: CommonCents on August 01, 2014, 09:51:18 AM
Age: Mid-to-late 30s
Location: Boston

Home Value*:NW = 3:4
Home Value*:Income = 3.8:1
House*: 52% paid off
*House value based on Zillow, not purchase price

Note: NW does not include full value of expected pension as it's still 7.5 years to vest

Savings Rate: ~55-60% (low this year, due to a number of purchases for new house)
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: davef on August 01, 2014, 10:04:11 AM
ok then
Me at 31/ wife at 29
Home Value : Net Worth 1.13:1
Home Value to gross income 1:3
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: dragoncar on August 01, 2014, 10:38:30 AM
age: mid 30s

Home:Net Worth   1 : 1.6
Home:Income:  2.1 : 1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Phil_Moore on August 01, 2014, 10:45:49 AM
33

Home:Net Worth 1.7 : 1
Home:Income: 6 : 1

I think all this tells you is that I live in London and clearly didn’t buy my house this year...
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: eccdogg on August 01, 2014, 11:19:16 AM
39 Raleigh NC

Home value:Net Worth 1:2

Home value:Income 2:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Mr Mark on August 01, 2014, 12:49:13 PM
Currently
home:net   1:10
Home:income  1:2


Hopefully soon will be
H:N   1:4
H:I   1:1
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: FIPurpose on August 01, 2014, 12:58:15 PM
Age 23

Home:NW 4.3:1
Home:Income 1.3:1

The goal is to have a 1 to 1 on home:NW around 25-26, this is not counting the equity in my home, but just investments.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: Philociraptor on August 01, 2014, 01:25:41 PM
Swooping in with the negative net worth:

Home/Net Worth: -2.8:1 (home is worth 2.8 times our negative net worth)
Home/Income: ~1:1 (gross income for wife and me)
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: TreeTired on August 01, 2014, 01:52:21 PM
Home is about  1/5 of net worth, not including the value of the home.   If I include the value of my home in net worth (and why not?)  it is  .17 of net worth.   

Value of home is about 10x my annual income, since I don't have much income.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: tomsang on August 01, 2014, 02:26:35 PM
Age 44

H:NW  =  1 : 4
H:I  =  1.5 : 1

Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: kmm on August 01, 2014, 02:35:06 PM
Age 45. Boston, expensive house.

Home Value/Net Worth 1 : 2.5
Home Value/Income 3.6 : 1

I'm interpreting "Home Value" to be the total value of the home, not just my equity. But I am including equity as part of net worth.

The house has appreciated about $100K since I bought it according to recent neighborhood comps, so I used that as a basis for Home Value, not what I paid.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: downtownshuter on August 01, 2014, 03:17:56 PM
late 20s in detroit suburb
home:NW 1:2
home: income about 1
we bought the cheapest house in an expensive (by detroit standards) neighborhood
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: madmax on August 01, 2014, 03:23:14 PM
No responses from the Bay Area? We don't own yet but most of our friends here have houses that are >6x annual income. Starter houses in our neighborhood start at 700K.
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: dandarc on August 01, 2014, 04:34:05 PM
House is 44% of networth, 85% of income

Early 30's, North Florida - houses are cheap here (although we could have certainly bought much more if we wanted to).
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: chasesfish on August 01, 2014, 07:23:13 PM
Home/NW:  1:2.5
Home/income:  2:3
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: dragoncar on August 01, 2014, 07:45:40 PM
No responses from the Bay Area? We don't own yet but most of our friends here have houses that are >6x annual income. Starter houses in our neighborhood start at 700K.

I'm in the bay, I have a high income but my ratio is still wacked

Staying here is costing me 2-3 extra years of work
Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: CanuckExpat on August 02, 2014, 12:20:18 AM
No responses from the Bay Area? We don't own yet but most of our friends here have houses that are >6x annual income. Starter houses in our neighborhood start at 700K.

We're in South Bay, Home:Net Worth ~1:1, Home:Income ~2:1 (assuming combined gross income).
I didn't know the first was a ratio people tracked, what are the implications?

Title: Re: What are your Home/Net Worth and Home/Income ratios?
Post by: dragoncar on August 02, 2014, 11:21:31 AM
No responses from the Bay Area? We don't own yet but most of our friends here have houses that are >6x annual income. Starter houses in our neighborhood start at 700K.

We're in South Bay, Home:Net Worth ~1:1, Home:Income ~2:1 (assuming combined gross income).
I didn't know the first was a ratio people tracked, what are the implications?

The first one is relevant because it shows your exposure to local real estate in your AA.  Also insofar as you assume an 80% mortgage, it shows your ability to pay off the home outright (which you can't assume but I guess we should add mortgage:net worth as another ratio in this thread)