Rising stock market and housing recovery bring US household net worth above pre-recession level

Posted: 07 Mar 2013 01:10 PM PST by Carpe Diem Blog

The Federal Reserve released data today for the net worth of US households in Q4 2012 (see B.100 Balance Sheet of Households and Nonprofit Organizations). Here are some highlights:

1. The net worth of US households increased to $66.1 trillion in the fourth quarter last year, which was an increase of $5.5 trillion, and 9%, from the same quarter in 2011 (see top chart). 
2. Household net worth in Q4 last year of $66.1 trillion was the highest level in any quarter since Q3 2007 before the recession, when household net worth was at an all-time high of $67.3 trillion (see top chart). 
3. As a result of rising home prices last year (7.9% according to CoreLogic’s repeat-sales home price index), the value of real estate owned by US households increased by $1.4 trillion during 2012 to $17.65 trillion in the fourth quarter, up from $16.24 trillion at the end of 2011. Household real estate values are now at their highest level since 2007 (see bottom chart above). With about 78 million US households owning homes, the $1.4 trillion in real estate appreciation last year would translate into an average gain of more than $19,000 per household in home value. 
4. The value of equities and mutual funds owned by US households increased almost $3 trillion last year and by more than 14%, from $13.2 trillion at the end of 2001 to $15.1 trillion in Q4 last year. 
5. The total value of all financial assets owned by US households increased by $3.8 trillion last year, from $50.6 trillion in Q4 2011 to $54.4 trillion in Q4 2012.

In nominal terms, US households last year gained back nearly all of the $16 trillion of net worth that they lost during the Great Recession, financial crisis, and collapse of housing values in 2008 and 2009. With further gains so far this year in: a) stock prices – the S&P is up year-to-date by 8.3% - and b) home prices – the CoreLogic home price index was up 9.7% in January and its pending home price index predicts another 9.7% gain in February home prices, it’s now pretty certain that US household net worth has surpassed the pre-recession peak of $67.3 trillion in Q3 2007 and reached a new all-time high.