US household wealth up after two years

Overall household worth rose to $53.1 trillion in the second quarter, the Fed reported, thanks to a rise in the stock market, home values, and personal savings.

Charles Krupa / AP
A sold sign is posted outside a newly constructed luxury home in Massachusetts Aug. 25. Housing markets across the country have stabilized and the home-price index used by the Fed actually rose for the quarter.

For the first time in two years, the net worth of American households posted a quarterly gain, the Federal Reserve reported Thursday.

The news marks a shift away from relentless recession-related declines in family well-being, measured in both financial assets and real estate value.

A rise in the stock market, in home values, and in personal savings all contributed to the gain in household assets in the second quarter, the Fed reported. At the same time, the "liability" side of the household balance sheet was also improving, as Americans continued to reduce their debt levels.

The result: Overall household net worth rose to $53.1 trillion, up from $51.1 in the previous quarter.

The quarterly Fed survey folds nonprofit groups into the household tally, but the details of the report make clear that family net worth posted substantial gains.

Along with jobs and incomes, net worth is a vital barometer of consumer health, and the shift in a positive direction provides a boost for economic recovery.

The second-quarter gain won't necessarily be repeated in such a dramatic way in future quarters. And it doesn't make up for the massive loss of wealth during the recession since 2007. Prior to the recession, net worth maxed out at nearly $64 trillion, according to the Fed's "flow of funds" tally.

So household wealth remains far below its peak.

The new numbers reflect several positive forces at work in recent months:

•Rising confidence about an economic recovery buoyed stock market prices, and pushed the value of household equities up by about $1.1 trillion dollars in the quarter. Shares held indirectly in mutual funds added another $486 billion to household assets.

•Housing markets across the country have stabilized somewhat, and the home-price index used by the Fed actually rose for the quarter. The resulting $157 billion gain in household assets is small compared to the rise in financial wealth. But in terms of consumer confidence this is every bit as important.

For millions of families, net worth is hinged more closely to home values than to the stock market. And the sharp declines in real estate values played a central role in causing the recession.

•Household liabilities declined by $34.5 billion, as borrowing for both home mortgages and consumer credit (such as credit cards) fell.

• Americans added $545.5 billion to their personal savings during the quarter, a separate part of the Fed survey shows. That's a big gain from $403 billion in the first quarter and $126 billion a year before that.

A couple of factors are at work. Households are working to repair their finances and replenish emergency funds. And the Obama stimulus package helped to push disposable incomes up for the quarter.


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