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Why does home ownership on its own matter? Net worth is inclusive of housing and assets and debt. And net worth is a direct measure of the wealth that is being

Why does home ownership on its own matter? Net worth is inclusive of housing and assets and debt. And net worth is a direct measure of the wealth that is being built.

johnnyanmac 11mo ago
Because homes are pretty much the only asset a millenial would have at that time that would have grown over time. a 08-9 graducate wouldn't really have much money to spar for stocks unless they made really lucky bets or happened to mine a fewbitcoin they forgot about. Most all else would have inflated or depreciated.
- bluGill 11mo ago
  401k and IRAs is where millennials should have their stocks and those have done very well over the years. There is little point in stocks elsewhere (unless you are very rich) since stocks are for long term investments and those two cover the retirement needs of nearly everyone (except the very rich), and there are few other savings needs people might have that stocks qualify for. Remember you won't live forever (at least not to current medical knowledge, you can bet otherwise if you want), and you can't take it with you (according to most religions). Thus once you have retirement covered and emergency savings you should be spending everything you earn. You should have enough money left at the end of the month to afford the things you buy at the end of the month, but there is no point in any more, enjoy life with what you earn. (donating to charity counts as enjoying life!)
actionfromafar 11mo ago
Someone posted this already but a more useful "net worth" is how big of a shock can take without paying multiples on the sticker price. And even homes are now sieving into institutional buyers. https://medium.com/newco/your-financial-shock-wealth-4845e6dc1d2f https://medium.com/newco/your-financial-shock-wealth-4845e6d...
- shubb 11mo ago
  Net worth is a funny metric. Joe has a 300k house with 100k equity and 200k mortgage. He has 100k in stocks in a 401k. Net worth negative 100k. Pete has $300 in his cheques account, and isn't eligible for loans or mortgage. Net worth positive $300 Obviously Joe is richer than Pete though.
  - chelmzy 11mo ago
    Most people would consider Joe's networth to be $200k.
  - senordevnyc 11mo ago
    Joe’s net worth is $200k. Why on earth would you value the home at $0? Net worth = assets - liabilities
  - quickthrowman 11mo ago
    > Obviously Joe is richer than Pete though. Yeah, because Joe’s net worth is $200,000 and Pete’s is $300 House equity = current value - mortgage balance You subtracted the mortgage twice, so your math is off by $200,000.00
    - actionfromafar 11mo ago
      Substitute some numbers until the example makes sense, the point is that net worth can be misleading.
      - bluGill 11mo ago
        Joe is on the hook for his mortgage and so his monthly cashflow must be higher to afford to live. However his net worth is larger and so he is richer. This is why middle class people often feel poor than those who are poor: they make more money and have more in total, but they also have large bills and if something happens those bills will catch up with them fast.
deleted 11mo ago
[deleted]
aianus 11mo ago
As a thought experiment would you not feel (much) poorer if houses suddenly cost >$5 million tomorrow and you didn't own one yet? Even if everything else cost the same? Even if everything else cost the same and your net worth went up $100k?

Why does home ownership on its own matter? Net worth is inclusive of housing and assets and debt. And net worth is a direct measure of the wealth that is being built.

johnnyanmac 11mo ago

Because homes are pretty much the only asset a millenial would have at that time that would have grown over time. a 08-9 graducate wouldn't really have much money to spar for stocks unless they made really lucky bets or happened to mine a fewbitcoin they forgot about. Most all else would have inflated or depreciated.

bluGill 11mo ago
401k and IRAs is where millennials should have their stocks and those have done very well over the years. There is little point in stocks elsewhere (unless you are very rich) since stocks are for long term investments and those two cover the retirement needs of nearly everyone (except the very rich), and there are few other savings needs people might have that stocks qualify for. Remember you won't live forever (at least not to current medical knowledge, you can bet otherwise if you want), and you can't take it with you (according to most religions). Thus once you have retirement covered and emergency savings you should be spending everything you earn. You should have enough money left at the end of the month to afford the things you buy at the end of the month, but there is no point in any more, enjoy life with what you earn. (donating to charity counts as enjoying life!)

actionfromafar 11mo ago

Someone posted this already but a more useful "net worth" is how big of a shock can take without paying multiples on the sticker price. And even homes are now sieving into institutional buyers. https://medium.com/newco/your-financial-shock-wealth-4845e6dc1d2f https://medium.com/newco/your-financial-shock-wealth-4845e6d...

shubb 11mo ago
Net worth is a funny metric. Joe has a 300k house with 100k equity and 200k mortgage. He has 100k in stocks in a 401k. Net worth negative 100k. Pete has $300 in his cheques account, and isn't eligible for loans or mortgage. Net worth positive $300 Obviously Joe is richer than Pete though.
- chelmzy 11mo ago
  Most people would consider Joe's networth to be $200k.
- senordevnyc 11mo ago
  Joe’s net worth is $200k. Why on earth would you value the home at $0? Net worth = assets - liabilities
- quickthrowman 11mo ago
  > Obviously Joe is richer than Pete though. Yeah, because Joe’s net worth is $200,000 and Pete’s is $300 House equity = current value - mortgage balance You subtracted the mortgage twice, so your math is off by $200,000.00
  - actionfromafar 11mo ago
    Substitute some numbers until the example makes sense, the point is that net worth can be misleading.
    - bluGill 11mo ago
      Joe is on the hook for his mortgage and so his monthly cashflow must be higher to afford to live. However his net worth is larger and so he is richer. This is why middle class people often feel poor than those who are poor: they make more money and have more in total, but they also have large bills and if something happens those bills will catch up with them fast.

deleted 11mo ago

[deleted]

aianus 11mo ago

As a thought experiment would you not feel (much) poorer if houses suddenly cost >$5 million tomorrow and you didn't own one yet? Even if everything else cost the same? Even if everything else cost the same and your net worth went up $100k?