I'd say it's the full value, not just the equity. If you have a 100k house with a 90k mortgage and real estate goes up or down 5%, you've made or lost 5k not 500.
That's an interesting point.
I suppose my initial thought is that while it may be a part of my
total net worth, it does not seem to be something I should calculate as a part of my 'stache given that I plan to continue living in this house during retirement. If my home appreciates or depreciates significantly it shouldn't have any affect on my withdrawal rates, so long as I still live in the home.
On the other hand, if I were to invest in an REIT or buy additional properties with the intention of generating revenue, then it would seem obvious to include them as part of my asset allocation when calculating my assets.
I'm realizing as I write this that I'm making a distinction between
net worth (which I would consider to be the total of assets owned less any liabilities) and what we like to refer to as
'stache (which I would consider to be the assets from which I plan to fund my retirement).
While a primary home is part of every homeowner's net worth, it does not seem to necessarily be a part of every homeowner's 'stache.
So, if the home is not actually a part of the 'stache, does it make sense to still consider it part of your real estate holdings when calculating allocation? Either answer seems to have some complications with it
(never mind that having
one house in
one market seems akin to choosing ONE individual stock for your entire domestic equity allocation - in which case not only would I be overweighted in real estate, I would be terribly undiversified within that asset class as well.)
I may be overthinking all of this - I was just curious how everyone else here handled it.