Saturday, September 20, 2014

Household Networth



The latest released statistics show that finally, the networth of households in the US is above where it was in 2007, but barley. 
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THE net worth of American households is now 20 percent higher than it was before it began to decline in 2007, the Federal Reserve reported this week. It said the households together were worth $81.5 trillion at the end of the second quarter, higher than ever and up 10 percent from a year earlier.
By another measure, household net worth is a little short of the record highs reached before the recession. It amounted to 471 percent of the nation’s gross domestic product in the second quarter, just short of the record 473 percent set in early 2007.
Those figures are not adjusted for inflation. But adjusted for the change in the Consumer Price Index, household wealth is also at a record high, 4 percent above the 2007 level.
The recovery in household wealth has come in ways that favor the wealthiest households. The Fed estimated that real estate owned by households is worth $22.9 trillion, 6 percent less than seven years earlier but 27 percent more than at the bottom of the real estate market in 2011.



change fPercentage rom Q2 2007

TOTAL
2Q ’14
TRILLIONS
NET WORTH
OF HOUSEHOLDS
$81.5
$95.4
$14.0
ASSETS
LIABILITIES
+
20
%
+
10
0
10
20
’08
’09
’10
’11
’12
’13
’14
’08
’09
’10
’11
’12
’13
’14
’08
’09
’10
’11
’12
’13
’14
SELECTED ASSETS
Stocks and
Mutual funds
Fixed-income
assets
Real Estate
$22.9
$21.0
Deposits
$9.9
$3.5
+
40
%
+
20
0
20
+
120
%
40


The biggest gains for households came in the equity markets. The Fed said households now owned $21 trillion in stock and mutual fund shares, 37 percent more than seven years earlier and almost 160 percent more than they owned at the bottom of the bear market in 2009.
While many people own stocks and mutual fund shares, by far the largest holdings are among those who are the wealthiest. In 2012, more than a third of dividends reported on tax returns went to taxpayers earning at least $2 million a year. That is more than double the share of dividends that went to those with taxable incomes of $100,000 or less.
During the recession, many households moved into safer fixed-income assets, including bonds issued by companies and governments. But with speculation that interest rates will rise, reducing the value of outstanding bonds, households have reduced their holdings to $3.5 trillion, a few billion less than in 2007. Total debt for households and nonprofit organizations equaled 77 percent of G.D.P., the lowest level since 2002. That figure peaked at 96 percent in early 2009.
Debt has also fallen for other sectors of the economy. The financial sector, including banks, had total debt at the end of the second quarter equal to 81 percent of G.D.P., the lowest level since 2000 and down from a peak of 119 percent. Loans to nonfinancial businesses have been rising in recent quarters, and now equal 67 percent of G.D.P., but that is lower than the peak of 74 percent reached in 2009.
The decline in household debt is largely due to lower mortgage debt, particularly home equity loans. But consumer credit has continued to rise and now equals a record 19 percent of G.D.P.
That is largely because of the continued surge in student loan debt — an obligation concentrated in younger households and among those who are far from wealthy. It has more than doubled since 2007. In 2006, when the Fed began to report on student loan debt as a separate category, the debt totaled $509 billion, or 22 percent of total consumer debt. Now, it equals $1.3 trillion, a 40 percent share of consumer debt.
That is more than Americans owe either on credit card debts ($839 billion) or auto loans ($919 billion).
Auto debt, however, has recovered and is now 17 percent higher than it was before the recession. That is 5.3 percent of G.D.P., well below the 6.5 percent record set in 2003.
While private sector debt has generally declined, at least relative to the size of the economy, government debt has been rising. But with the federal budget deficit falling, the ratio of federal government debt to G.D.P. slipped to 72.9 percent in the second quarter from 73.6 percent three months earlier.

19 comments:

Vinona Rugova said...

It is hard to believe that even during this rough economical period the net worth in American households has increased by 20 percent. Student loans are totaling trillions of dollars , that puts the student in a lifetime of debt but also their guardian who may be the cosigner or provider of the loan. Because loans are payable at a later time , for the time being the families are doing well financially. I feel like one of the reasons the family net worth increased is because it seems like all members in a family are usually working , people start at age 16 and they end up working the rest of their life. It is engraved in peoples heads that money makes the world go round and that they should start making it as soon as they can. Currently there are not many positive stories being told , this article is refreshing.

Ghassan Karam said...

Vinona,
Note thoughg that the growth in real terms was only 4 % in 7 years which is nothing to write home about :-)

Anonymous said...

It is crazy to learn all the debt that the country is responsible for. Over the years people have built up more and more debt whether its from their student loans, their mortgage, or their car payments, each household has its own number for what they owe to the country. It is so sad to know that the debt for each household is going up and also the debt for the government continues to go up. Students loans have now surpassed the debt that credit cards have caused. That is shocking because it means that no one is getting paid enough. Americans are taking out huge amounts of debt with student loans and they are spending money that they do not have with their credit cards and racking up an entirely new form of debt for themselves.

Katherine Haas

Anonymous said...

The unnerving part about this article was that even though the American household percentage has risen to the point it has, it has done so in small increments over the past seven years. This is just the highest point that it has reached thus far.
But to read that student debt is such a large percentage of the national debt as compared to other debts that Americans has accumulated over the years. I truly do not know where to put my faith in the economic system.
Whether this article was positive or negative I cannot say, but what I do know is that our government is exploiting all groups of people and making them owe tremendous amounts of money when they do not have the means to pay it off later in life.

Beverly Levine

Anonymous said...

Marissa Cotroneo said.....
Debt has dramatically affected all aspects of our economy. It is all because of loans. It is very easy to take out a loan and see it as an easy 100 dollars a month fee. But what people don't realize is that all of that money adds up and sooner or later you can't keep up with that 100 dollars a month payment. Americans are having this problem when it comes to automobile loans, student loans, and house loans. The percentage of Americans that owe money in each of these categories for the most part are getting slimmer; the only one that is increasing is the student loan debt. The student loan debt went from 22%, to a smashing 40 % of Americans household debt. Because the average American still owes so much money their household wealth is still small. The fact that the household wealth only increased by four percent is ridiculous. Although it is taking a long time for everything to go back to the way it should be, at least it is getting better; that is all that we can ask for.

Doris Da Silva said...

Although the household net worth increased by 4 percent since 2007, it is not a substantial increase; especially if the recovery in household wealth favors the wealthiest household. The average American continue to have same if not worst household wealth due to rising outstanding debt in credit card and student loans in which to my astonishment student loans has more than doubled since 2007. I don’t know if the substantial increase in student loans is due to lack of well paid jobs or the loan rate, either way being attach to a huge debt and being part of a statistic is not what we expect when taking out student loans. After reading this article I’m hesitating in believing that the American economy is recovering, but I have high hopes.

Anonymous said...

This article talked about how a majority of America is in debt. These debts come from taking out loans on cars, credit cards, or education. Of the three types of debt, the overwhelming majority of debt comes from student loans. Although there is an abundance of debt in the American economy recently, one way that families have tried to fight their way back is by buying and selling stocks. The stock exchange is back on its feet and so too is America to a degree after a recession. There is a significant decline in household debts due in part to lower mortgage debts. I believe that the economy is almost completely back to when America was thriving and this in large part thanks to the stock market.
-Nick Bellantese

Stamyr R said...

This article informs the readers about the household wealth in America presently. It is at a record high since the recession that started in 2007, 4% higher than what it was before 2007. Although this has happened, America is still in great debt. Seeing how student loan debt is higher than credit card debt is mind blowing and brings up the question of whether not the economic system is on it's way to redemption or not. Students go to college to get jobs so they can be financially stable but it seems that the loans they take out prevent them from being able to be stable. There may be some good aspects of the economy but debt should be the main focus.

Brenden Wisnewski said...

The household wealth has only grown 4% in 7 years, 4% sounds good but it is growing in such small increments that its nothing to be to excited about. I agree with Marissa about Americas loan problem. We take out loans thinking the monthly payments will be a piece of cake but they grow due to interest rates. We do not realize how much the price of a loan will increase due to interest. Student loan interest rates are around 8% and that loan will grow very fast and most of us do not even realize how much extra money we are paying due to interest. Also student loans are hard to avoid because most college students need loans to go to college. It is nice to see that private sector debt is decreasing but the government debt is already extremely high, about 17 trillion, and growing. Our nation has a big problem with debt and it is a hard thing to avoid. Some statistics in this article show that our economy is getting back to normal but we are still not completely back to normal.

Matthew Kurdewan said...

This article states that we have just begun to get out of the economic hole that was created in 2007. The biggest gains in recovery have come from the equity market. Households own $21 trillion in stocks and mutual funds, however most of these are owned by the wealthy so only the wealthy have begun to make a substantial recovery. For others they are still in tough times, especially the younger generations because student loans have nearly doubled since 2007 generating $1.3 trillion in debt. That is more than credit card debt or auto loan debt in the country. With many younger households in such great debt it is hard for them to create substantial wealth and provide for their families. This reminds me of the previous article, reinforcing to me that my student loans should be paid off as soon as possible, otherwise it will be hard for me to become wealthy.

Brittany King said...

This article discusses the net worth of households rising 20 percent since the decline in 2007. To most people this seems like an amazing increase and helps to reassure their trust in the economy again. What they fail to realize is that the actual growth when you use the consumer price index is only 4 percent over the past 7 years. Sure it is great that the net worth is finally increasing but it is doing so in such small increments that it can almost go unnoticed. Not only is the net worth increasing at a sluggish rate but also the increase is generally occurring in the wealthiest households. Therefore, the average American is most likely in the same financial position that they were in 2007. Additionally, the article states that total household debt has declined as a percentage of GDP has declined, but it does not state the root cause. Has the decrease in household debt occurred due to the stricter regulations on bank loans? The numerous amounts of homes that have been foreclosed on as people could not pay? It also states that as overall household debt is declining, student loan debt and credit debt continue to skyrocket. Additionally, student loan debt is now even higher than the credit card debt and the debt on auto loans in the US. In conclusion, although the private sector debt may be declining slowly in terms of the economy the government debt has been rising enough to make the benefits of such a decline look microscopical.

Aedjet Simoy said...

The article talks about the increase in the net worth of American households by 20%. Some people will believe that this increase is a positive idea but in reality it isn't because of the stacking amount of debt our country has. The amount of debt that our country is accountable for is unbelievably tremendous. Debt is caused by none other than loans itself. Student loan, auto loan and credit loan these loans are the major factors that contributes to the debt of our country significantly. This article reminds of the previous article because it is similar in a way that both article conveys the statistics of debt in America. It is truly hard to believe but at the end of the day we all believe that one day our economy will recover and help more families around the nation.

Aly Rafeh said...

Even though the article says that the economy is slowly getting better I think it is going to be a long time before we are near where the economy was in the past. It will take a long time because of the fact that our government is still very deep in debt. Regardless of the fact that a lot of the other debt such as auto loans, etc. has improved, I still do not think that its enough. I believe there still much to do to imprve our economy.

Anonymous said...

Bryan Rivers
Even though the USA is the most powerful economic country in the world it still has tremendous problems. The debt that has accumulated from the households and non-profit organizations was 77% of the GDP. The only good part is that the private sectors debt has been declining over the years. Business are being smarter in the production and amount of investments they do. The government is the sector that is going in the opposite direction. They have to be the ones to fix the debt, but doing so in a smart way. Spending money carelessly is only going to increase the damage that is already done.

karthik said...

It is crazy to realize all the debt this country is in because of the various auto , home and education loans. majority of the debts come from student loans not being paid because graduates cannot find jobs. It tells us that even with so much debt the average family net worth has increased but that is possibly due to all members of family working as the new mindset is to start working as early as possible. i think people need to look at their contracts more carefully when taking a loan as a lot of people see the small picture of maybe a $100 a month but all that adds up to the point where they can't pay it off

Anonymous said...

Brian DelVecchio

I believe that this article does a good job shining the light on how poorly wealth is distributed across America. The overall household worth has raised significantly but that is largely due to the wealthiest gaining an excessive amount more money than in the past. The article states how more than a third of dividends on tax returns were to those earning at least $2 million which is more than double than that of those earning under $100,000. This means that dividends from stocks are being earned by the wealthiest and they are gaining much more than their poorer counterparts. I feel that if there was a study on how the household wealth net-worth for earners under $100,000 would be very different than the one that we read and could raise attention to the fact that life is not necessarily improving for the poorer classes. This also leads to student loan debt as the richer do not need to deal with said debt nearly as much as the poor and middle classes. The debt has been growing partially because there are more people going to university which is great but many of these people either drop out or graduate without a job to capitalize on their degree, so they cannot pay the debt off nearly as much as initially planned.

Jaime Alvarez said...

When the United States got hit with the 2007 recession, all economic statistics went on a decline. Since then, we have been on the rise as a whole, which is shown by the four percent increase. That number does not sound like an astronomical increase but the feeling of being on the rise is so positive. Most people would be happier with a higher numerical increase but I am ok with it because we are not on a decline.

Domenick Luongo said...

The four percent increase of American households net worth shows that the economy is getting a little bit stronger but is still very fragile. I feel that we are moving away from the economic lows in 2007 and towards a prosperous economy in the future. I am worried to find out what the future has in stored regarding to the new student loans debt, which has more than double since 2006. Another concern is the gap between the wealthy and poor in the stock market. In the article it said that more than twice the amount of dividends were paid to taxpayers earning two million or more instead of taxpayer whose annual earning are 100,000 or less. This means the twenty-one trillion dollars households owns in stock are mostly owned by the wealthy which is a small percentage of Americans. This puts an major asterisks next what the Fed say is "The Biggest gains".

Nick Leader said...

This article is mainly about debt which is continuing to increase due to mortgages, credit cards, car loans, and student loans. All of these things is increasing the debt substantially. What a lot of people seem to be doing is spending more than what they can afford. An example of this is credit card debt. Credit card debt is due to using your credit card to spend a lot of money, but we need to pay these companies back what we paid plus tax. A lot of people can't afford to pay the bill and that puts them in debt. Another example is student loans. People take out loans to help pay for college, over the years the amount increases due to the tax and a lot of people can't afford to pay the government back. The student loan debt is now greater than credit card debt. That just shows how much much debt we are in only with student loans. Yes the economy is getting stronger than it was back in 2007, but debt is increasing and is becoming more common to more americans.