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Jacksonville Florida Real Estate Blog

Get latest news and real estate development in Jacksonville, Florida. A real estate blog by Will Vasana, Realtor.

September 21, 2009

U.S. Net Worth Grows for First Time Since '07

The Federal Reserve reports that Americans actually got a little wealthier for the first time since 2007. Household wealth grew by $2 trillion, or about 4 percent, this spring, ending the longest stretch of quarterly declines on records dating back to 1952.

Net worth – the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards – came to $53.1 trillion for the second quarter.

Stock portfolios came back to life this spring after the market hit its lows for the year in March, and home prices have stabilized. But the collective American wallet is still almost 20 percent thinner than it was when net worth peaked two years ago.

Some analysts say it could take as long as four years for households to recoup trillions in losses and get back to where they were before the downturn struck in December 2007.

The Associated Press has the following article on Friday:

“Households saw $14 trillion of wealth get blown away by the recession, and they recouped $2 trillion of that in the second quarter. That’s good news,” said Brian Bethune, economist at IHS Global Insight. “But they still have another $12 trillion to go to get back to where they were.”

Many analysts expect the economic recovery to be lethargic, limiting further gains in the stock and housing markets. That’s why Scott Hoyt, senior director of consumer economics at Moody’s, thinks household wealth won’t rise back to pre-recession levels until 2012 or 2013.

“It is going to take a while for Americans to regain lost ground and become as comfortable as they were before all this started,” Hoyt said.

Even if the economy continues to improve, analysts say the erosion of wealth will keep Americans thrifty for years. In fact, even as wealth grew, Americans trimmed their spending slightly in the spring.

The increase in wealth in the second quarter was led by stock portfolios, the Fed report said. The value of Americans’ stock holdings rose almost 22 percent from the first quarter – the first increase in two years.

Higher home prices helped, too. The value of real-estate holdings rose 1.8 percent, the first gain since the end of 2006. Home prices are still about 30 percent below their 2006 peak.

Home equity, the market value of a home minus what’s still owed on the mortgage, has been dropping in recent years – first because more Americans used their homes to get loans and now because of falling home prices.

Collectively, U.S. homeowners had just over 43 percent equity in their homes in the second quarter, up only slightly from a record low in the first quarter. Moody’s estimates nearly a quarter of all U.S. homeowners owe more on their mortgages then their homes are worth.

This week, Fed Chairman Ben Bernanke said the worst recession since the 1930s is probably over. He warned that the pace of recovery probably won’t be brisk enough to generate solid job growth and keep the unemployment rate – now at a 26-year high of 9.7 percent – from rising further.

Retail sales jumped in August by the most in more than three years. But rising unemployment, the reduced wealth and still hard-to-get credit are expected to keep people cautious about spending in the months ahead.

Households are trimming their debt loads, too. Total household debt – including mortgages, credit cards, autos and other consumer loans – stood at $13.7 trillion in the second quarter, the Fed report said. That’s down slightly from $13.8 trillion in the first three months of this year.

Debt peaked at $13.9 trillion in the spring of last year.

Americans’ savings rate – savings as a percentage of after-tax income – rose to 5 percent in the second quarter, according to Commerce Department figures. Analysts believe households are using that money to whittle down their debt.

Source: Federal Reserve, The Associated Press

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