Question for those who track home equity as part of Net Worth, how do you do it? Specifically, how often do you do it? My original plan was once a year when I get the taxable value of my home, but with prices skyrocketing up so much this year, I'm concerned these values won't hold and it'll lead to unrealistic home valuation.
For those who do it, what's your source of truth and how often do you update it? And, how are you handling the crazy price jumps this year?
I track home equity as part of my net worth because, well, it **IS** part of my net worth.
I don't track it as part of my FI stash because I have no intention to sell it and live off of any portion of the proceeds.
We have rental property as well and we (generally) follow the same guidelines.
I update the values at the end of the year or if something major happens that might greatly affect the value. In the past, that has usually been when we've upgraded a property and increased its potential sale value. This time, I updated the values at the 1/2 year mark because of the big run up in sales prices. About 15 years ago we had a big run-up in property values in my area because the government was moving some important military assets to the nearby post and that meant more people with good jobs.
I don't take Zillow as gospel. I'll look at some other houses that I think are comparable that are selling in the area. If I know my property is better or worse than average for the houses around it I'll adjust accordingly. One house is on a block where there were a lot of foreclosures. The houses were renovated and rented out (instead of flipped and sold) so that block hasn't had its valuations properly adjusted yet, so I added some in for that.
It really doesn't matter whether I get it exactly right or not. The purpose of tracking net worth, for us, is to look at trends over time. If prices drop back down then, well, that portion of our net worth will drop with them. But because most people don't buy their homes for cash, if the homes drop below what they owe on their mortgages they'll have to cough up the difference. That tends to slow down the price drops because people can't afford to sell at the lower prices.