Ah, yes, I see your point. But isn't that also the case for money in the market? In this case, given the area and the time horizon, I can't see it dropping to nothing, but 20-30% fluctuations are certainly possible. The hope is that we don't put ourselves in a position where we're forced to sell, but obviously that's never guaranteed...
We all build our models and projections based on assumptions.
The stock market has been around a relatively long time. And in the long run, over a 30 year period, the market returns around 8% on average per year. That doesn't mean your portfolio will do the same, nor that the next 30 years will be like the historical average. It just gives you a reasonable number to put in your model.
Home values tend to increase at the rate of inflation. But that's an average, and just as they say "location, location, location" when purchasing a house, the value of a house is very, very local. The same is true for rental income.
I think I understand what you are hoping for. But if I read what you wrote correctly, your timeframe is simply too far out and with too many variables to make reasonable assumptions about the difference in value between the home you will be purchasing soon and a home you might purchase 20+ years down the road.
When I purchased my vacation/weekend/eventual retirement home it ended up being larger and more expensive than my primary residence. It just happened to be in the location where we want to spend the rest of our lives and we could afford it. That was 6 years ago. Since then, the values of both homes have increased a lot.
Now that we are nearer our full retirement, I have a better handle on the proceeds I can expect when I sell. We own our primary residence without a mortgage, while we still have 24 years remaining on the mortgage of our retirement home. While I could use the proceeds from our first home to completely pay off the second, I haven't yet decided that would be the optimal path.
In my planning, I plot two scenarios. In the first, I pay off our mortgage, and reduce our expenses. In the second, I keep the mortgage, and invest the net proceeds from the sale of our primary home. Both scenarios allow us to be "successful" in our retirement. When the time comes, we'll decide on one of the two paths.
I couldn't really have applied numbers to these two scenarios until recently. Even then, the housing market could change such that our primary residence sells for far more or far less than I am predicting. We would be fine in either case.
As for rental income, to me it just seems too hard to predict out that far. My brother-in-law rented out a portion of his home. I was stunned to hear how much he could get for what was basically a "basement". But it turned out that he was in the right location, and at the right time.
On the other hand, my sister's father and mother-in-law rented out a unit attached to their home for many years with a positive cashflow. Then the housing market in their locale changed and they had to drop the rental price by 40% after the unit was empty for many months.
In your models, you can make any assumptions you choose. Assume you can downsize and net 50% of the value of your property if you like. Assume your cashflow from your rental unit grows by your projected inflation rate forever, if you like. But all models with many variables and long timeframes tend to have wide ranges of end values. That's just the way they work.
I calculate Net Worth. But for retirement planning, I always used (Net Worth - Home Equity).
If you think about a swr of 3.5%, is that like having an extra 700k in the bank?
