US Household Net Worth Hits New All-Time High

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The American household net wealth meter just hit another all-time high. New data from the Federal Reserve was released on Wednesday, June 11, covering the first quarter of 2015, and American households and nonprofits saw the value of their net worth jump by $1.6 trillion to $84.9 trillion in the first quarter of 2015. The gains sound big, but they are small compared to the gains of 2011 to 2013.

Net worth of U.S. households and nonprofits is effectively the value of homes, stocks, bonds, land and other assets added together, then deducting the debt and other liabilities. One consideration here is that the figures are not adjusted based on inflation and are not adjusted for growth of the total population.

The value of $84.925 trillion is actually up from $83.3 trillion at the end of 2014 and is up from $80.3 trillion at the end of the first quarter of 2015.

Most of the gains came from rising home values and higher stock prices. Of the $1.6 trillion or so gained in the first quarter, some $487 billion of the gain came from stocks and mutual funds. The value of residential real estate rose by some $503 billion.

There is of course a concern here that much of the gains in household net wealth are skewed toward the wealthy. That can limit economic gains to the broader economy. Some growth also coincides with total population growth, and that is also influenced by inflation and then again by productivity.

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If you go back through time, you can see what the recession did to the net wealth of American households. From the $66.72 trillion at the end of 2007, that fell to $56.5 trillion at the end of 2008. It took until the end of 2012 with a reading of $69.86 trillion for it to surpass the end of year reading from 2007.

Household net worth versus personal disposable income was at a rate of 639% in the first quarter in 2015. That is up from a year ago, and it is the highest reading since the second half of 2007 — which is before the great recession started coming into play. The total in home-owners equity versus total real estate holdings rose to 55.6% from 54.6% in the prior quarter.

Another factor contributing the gain in net wealth is that families reduced debt. The total household debt versus disposable income was 106.5% in the first quarter of 2015. This was the lowest number in a decade, and was down one full point from the previous report.

Where the report from the Fed on household net worth gets more interesting is that total borrowing rose only by 2.2% at an annual pace. This marked the lowest growth in over a year, and mortgages actually shrank at a very minimal rate of 0.3%. Still, consumer borrowing and nonrevolving credit (car loans, credit card debt and student debt) rose by 5.6% on an annualized basis.

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Other key components were as follows:

  • Domestic nonfinancial debt outstanding was $41.7 trillion, of which household debt was $13.6 trillion, nonfinancial business debt was $12.2 trillion and total government debt was $16.0 trillion.
  • Domestic nonfinancial debt growth was 2.8% at a seasonally adjusted annual rate.
  • Nonfinancial business debt rose at an annual rate of 6.6%.
  • State and local government debt rose at an annual rate of 4.8%, up from an annual rate of 1.1% in the prior quarter.
  • Federal government debt declined 0.4% at an annual rate in the first quarter, after increasing 5.4% at an annual rate in the previous quarter.