Dave Ramsey is all about that. It’s how so many of his listeners are “millionaires”.
My sense is the opposite. There’s a large negative net-worth to renting, and to realize it, you would need to buy an annuity that covers your rent, or just own a house.
I guess it depends on details, but obviously on the face it’s silly to say someone who fully owns a $M house is as close to retiring as someone who is renting a $M house.
I would only include how much equity I could actually extract from the house at any given time.
I don’t see much point in quoting the market value of the house as you are obviously living in it.
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Sure. As much as you own.
You focused on probably the least likely of the six options I proposed. My question to you though is, when are you going to realize that extra value in your home?
It’s likely to happen when you’re at or near retirement age and moving to a cheaper neighborhood/city is difficult at that age. Finding a smaller home in the same neighborhood is also difficult in many parts of the country because zoning doesn’t allow it or the old starter homes have been scraped off and replaced with Mcmansions. It’s a known problem for many baby boomers approaching retirement.
This free article has many commenters lamenting that they are unable to downsize
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Sure, but consider an alternative.
You have a $500,000 loan on a $2M house.
I own a $300,000 house outright.
We both plan to live in our current homes when we retire and we do not want to take a reverse mortgage.
All other details for you and me (age, current and projected future income, current retirement savings, other assets, desired retirement income, current spending habits) are identical.
Clearly you are a lot richer than me.
Clearly I am a lot closer to retirement than you.
In other words… what is the purpose for which you are considering your net worth?
What did Sheba used to say?
Mark it Zero 
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I think ‘retirement’ is where this matters. At retirement, you have income, which is a combination of SS and your assets like your 401k, IRA, etc. And you have expenses. Housing is a big expense for most, and owning a home outright means you only pay taxes, insurance, and maintenance.
So it’s less ‘net worth,’ and more ‘how much income do I have, and what are my expenses?’ Personally, I plan on retiring with a paid-for house, so I don’t count home equity, I only look at my nest egg, and my expenses.
I don’t feel convinced at all by this random comment section.
The number 1 comment (and most of the other comments are similar) is:
We’ve lived in a lovely old 4-bedroom Victorian in a small town north of NYC for 20 years. When we moved in, we had three kids plus us. The kids are gone now so it is far too large for two people and two dogs.
The problem is that our house is close to being paid off and our mortgage interest rate is 2.75%. If we sold and needed a mortgage, we would pay 9% + (less on a VA)!
Worse, there is little to no inventory to buy in the area. Most homes are overpriced at $400+/square foot, and if they come up for sale, they sell in 48 hours over the asking price and frequently for cash. That is great for selling but not for buying. So our problem, like so many of our age, is where do we go if we sell it?
We will keep our lovely old Victorian for now, as large as it is even though we have a great amount of equity we can’t utilize. It’s a conundrum. Perhaps an office and separate bedroom for each dog?
Some questions are:
Can they rent?
Can they move somewhere?
Can they sell their house (which is big and fancy and almost paid off) and buy a smaller house with cash?
Is their house also “overpriced”?
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Can they rent out some of the spare bedrooms?
Yes, they have to rent them out to their dogs.
It must be tough.
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Fixed!
Rent amount seems a bit low.
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But that doesn’t mean you have less net worth, it means you have a more lavish lifestyle.
You are also farther away from retirement if you plan to eat caviar and drink fancy scotch everyday until you die.
This one is the difficult one (and the one most likely to take advantage of their increased home value). If somebody has lived in the same neighborhood since early adulthood or childhood, they are reluctant to move to another neighborhood. As you get older, it’s harder to be accepted by a new community, unless there are a lot of fellow transplants. This was particularly noticeable in the Midwest.
But many areas, including neighborhoods where a lot of baby boomers live, have zoning that only allows single-family homes. That means when older adults decide their current homes are too big, they basically have to move out of their neighborhoods.
“People want to be able to age in their communities, but there are very few options available for people who do want to do that but want to downsize,” Arigoni says.
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You’d think that selling a house that’s too big for you and buying a smaller place in the same community would allow you to buy the smaller place outright or with a minimal mortgage…
I guess maybe not if your place is a knock down, rebuild…
People who live in a home that is smaller than your current home are most likely criminals /s
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Huh? You live in a $2M house and I live in a $300K house and everything else is identical. You have the more lavish lifestyle because you live in a MUCH nicer house (or a nicer neighborhood or a more desirable city or something that makes your house worth nearly 10x as much as mine).
I do technically have less net worth. Maybe our non-house assets are $1M. And we each earn $150,000 and we are spending 50% of our income on [housing+retirement] and 50% on other stuff.
So my net worth is $1.3M and your net worth is $2.5M. We can retire when we hit $2M in non-house assets. (For now we’ll ignore that your post-retirement property taxes, insurance, maintenance, utilities, etc) are all probably higher than mine, but in reality you might need a little more than me to have the same discretionary spending money as me.)
Your net worth is higher than mine, but you’re further from retirement than me. Because more of my savings is going to retirement whereas yours is paying down your remaining debt.
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Oops sorry, in my response I completely forgot that you were already using “you” and “I” hypothetical pronouns. Duh.
Anyway yes, in your scenario, my net-worth is higher, and I’m farther from retirement, but only because my lifestyle is more lavish. If I simply sold my house and bought your house with cash, I could retire right away.
My house is not for sale! 
But to your point I said that it matters why you are calculating your net worth. Applying for a loan? Great, count the positive equity. Need to determine if you’re beating your sibling at life? Count the market value and ignore the loan if that works in your favor. Have no intention of ever selling it or moving and need to know when you have saved enough to retire? Mark it zero. Intend to downsize in retirement? Count the difference between [equity after transaction costs & moving expenses] and [purchase price of the new home].