To us, its not something that we will ever touch (meaning sell or borrow against.) For now, we will live in in at least another 30 years if not forever. Since we will never put our house up as collateral, our home will never pay our bills, it'll never feed us or pay for vacations. Our investments will.
For retirement planning, including our house in our NW is meaningless. We are only interested in knowing how much our funds that we plan on living off of are worth. Since our home does not generate $$, its not included.
I know including home is a touchy subject. Different strokes for different folks. In my eyes, it pads people's numbers. If our house generated income, we would include it. If we had rentals, they would also be included.
I don’t include our house when I am thinking of investable money. I would include it in a description of our net worth. Much depends on the context and the question. If the question is a pure accounting issue, then of course it needs to be included if you are using the definition of assets minus liabilities. Then of course you are using a lot of items likes cars, bikes, refrigerators, etc. that would add to your net worth but not be something you can invest in the usual sense.
So, if the question is what do you have that you can invest FREEE of any liabilities (such as a mortgage or other loan), then one does not include home equity.
But let’s say one rents and does not own. One does not have a house asset except insofar as one has a leasehold right. Would you, on your terminology, deduct anything for that person? If not, why not? The renter is not similarly situated to a homeowner who cannot earn income on his/her home. Would you deduct from net worth for the net present value of the expected stream of rent payments?
I am not trying to provoke in the least. The question is really simply one of terminology in the end. The term “net worth” is a poor one to describe liquid monetary assets available to invest, or income producing assets.
I do think that when HNW, VHNW and UHNW terms are defined, they speak to liquid investable assets or assets held for investment that are not art, cars, furniture,planes, etc. E.g. I think only real estate held for investment probably qualifies, in addition to cash, stocks, bonds, etc.
