Home Value as % of Net Worth at Retirement?

[disneysteve]

I think if more people monitored their home equity as a percentage of their net worth, especially as they start to get "older", it might prompt more people to downsize earlier on. For example, if someone is 55 and realizes their home equity is too large a fraction of their net worth, and they go ahead and put their home up for sale, they are in an infinitely better position than someone who comes to the same realization at 65 and who is forced to have a "fire sale" on their home.

Maybe I'm missing something, but I still don't see where it matters. If at 55, I determine that we are on track to have a large enough nest egg to support the retirement lifestyle we wish to have and cover all of our expenses on a 4% withdrawal rate, what difference does it make whether our home represents 10% or 20% or 50% of our net worth? If the equity in the home is not going to be needed to cover expenses in retirement, who cares how much it is worth or what percentage of net worth it represents? It is a non-issue in my mind.

[safari]

The equity would only matter if you are planning to sell your house when you retire and either rent an apartment or move to a different area where you can buy a similar house for much cheaper.

[jIM_Ohio]

I don't want my house to appreciate much because I am planning to buy a bigger house when I start a family. If all houses appreciate in value, I'd have to pay more to upgrade a house. For example, if my house costs $500K and I want to buy a house that costs $1 mil, the difference is $500K. If houses appreciate 20%, my house would cost $600K and the other house would cost $1.2 mil, which means I'd have to pay $600K difference to upgrade the house. That's why I am hoping that house prices continue to plummet.

basic supply and demand.

The two houses would not appreciate at same rate, IMO.

The cheaper the house, the less (as a percentage) it appreciates.

The more expensive the house, the higher the rate of appreciation. Might be 3% to 3.5% or 3% to 3.25%, but the more expensive house will

a) maintain it's value better
b) appreciate at a higher percentage
c) in general have lower supply
d) this assumes the more expensive properties are in desireable locations as well (demand is higher).

A house in Manhatten or SSF Bay area is more expensive now, and they appreciate at a higher rate (because supply is limited and demand is high) than my house in Ohio.

Yet my house in Ohio is probably much bigger and has a bigger lot than a house of the same price in either location and I sit on only 1/3 of an acre with 3200 sq ft for 350k- my sister told me the same house on Long Island would be 750k or 1000k. The long island house probably appreciates at 4-4.5%, where in Ohio I probably get 2% per year if I am lucky.

In the example given above (500k house and 1000k house), if the 1000k house is in a better neighborhood/location, expect it to appreciate at a rate higher than the 500k house.