Saturday, September 20, 2014
The latest released statistics show that finally, the networth of households in the US is above where it was in 2007, but barley.
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.
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.