Two Numbers, One House
Home equity is your home's current market value minus what you still owe on it. If the house is worth $420,000 and the mortgage balance is $260,000, your equity is $160,000. That figure belongs in your net worth, and for most homeowners it is the largest single line in it.
What it is not is money you can spend. Equity is value locked inside an asset you happen to live in.
What Getting to It Costs
Turning equity into cash means selling, refinancing, or borrowing against it. Selling carries agent fees and closing costs, plus the small matter of needing somewhere else to live. Borrowing against it adds a new liability, which moves your net worth right back down.
There is also timing. A brokerage balance can be liquidated in days. A house takes months, and the price you end up with depends on a market you do not control.
How to Treat It
Count it, but count it accurately. Use a current market estimate rather than your purchase price, and revisit it once or twice a year instead of chasing every fluctuation. Keep the mortgage balance listed beside it so you are always looking at both sides at once.
Conclusion
Equity is real value and it belongs on your balance sheet. Just keep it mentally separate from the cash you could reach tomorrow, because the two behave nothing alike.