Household Net Worth: Financial and Tangible Assets
American households were $2 trillion richer on June 30 than they were three months earlier, the first time in two years that household net worth has increased, the Federal Reserve reported Thursday in its quarterly flow of funds report. Household wealth rose in the second quarter at a 17% annual rate, or $2 trillion, to $53.1 trillion after falling at a 13% rate in the first quarter, the Fed said. It was the first time since the second quarter of 2007 that wealth had increased. Net worth is down $12.2 trillion from the peak in 2007, an indication of how much the collapse in stock prices and home prices have hurt.
Household Net Worth + Annual Rate of Change
click for ginormous chart
chart via Bianco Research
>
See also:
Households’ net worth rises for first time in two years
Consumers continue to pay down debts at record pace
Rex Nutting,
MarketWatch, Sept. 17, 2009,
http://www.marketwatch.com/story/household-net-worth-rises-first-time-in-two-years-2009-09-17
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September 24th, 2009 at 11:36 am
Reflate or die. That’s the Fed’s mantra.
September 24th, 2009 at 11:36 am
Well done buddy.
just heard from barclays
market are underestmating the recovery. Now that is a first.
Markets underestimating the reovery
Fresbee
September 24th, 2009 at 11:37 am
So…the stock market went up?
September 24th, 2009 at 12:00 pm
Correlation is not Causation?
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Nixon+closes+Gold+Window
Dateline: 15 Aug 1971
needless to say, in this World of Paperbacks, you need some hard cover..
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Petrodollar
one of the greatest Forces to retard Progress, since the Disc Brake.
http://www.bambooweb.com/articles/d/i/Disc_brake.html
September 24th, 2009 at 12:01 pm
interesting chart … if one plops an smooth exponential curve over the household net worth line, one sees the actual data deviating upwards from the curve in the neighborhood of 1980 (about the same time that HEL’s became popular — coincidence?). We are still a little above the idealized exponential mean, I think — but the thing that is missing is an overshoot past the mean … at least so far … I would expect to see household net worth eventually crater to the $40T-$45T range before it can manage any sustainable growth upward …
Jus’ eyeball analytics, no fancy math involved here …
September 24th, 2009 at 12:03 pm
@Mannwich
“… Reflate or die …”
So I guess it’s die, eh?
September 24th, 2009 at 12:37 pm
“one sees the actual data deviating upwards from the curve in the neighborhood of 1980″
1980 is about the time that the boomers started entering the workforce in large numbers:
1950′s boomers born
1960s, early 1970′s : boomers educated (is the high cost of educating all these young uns a factor in stagflation?)
late 1970s – 1985 : boomer generation centred around age group 25-29, and working hard
1985- : you know the rest
Household wealth rises strongly from that point (1980s) on, (leaving the trend line as you observe), until the point at which the boomer bulge passes 50, when shit hits the fan.
What happens to household wealth after this point is mostly determined IMO by the shape of the population following after the boomers, and given gloablisation, what the shape of the population is like elsewhere.
You have prob seen seen this graph from CR, but it shows what I’m talking about.
http://www.calculatedriskblog.com/2009/08/us-population-distribution-by-age-1950.html
September 24th, 2009 at 12:37 pm
Guess we can spend all of that extra dough on cheaper houses, eh?
Existing-home sales drop 2.7% in August to 5.1 million pace
http://www.marketwatch.com/story/existing-home-sales-drop-27-to-510-million-2009-09-24
Luvn’ them green shoots! Yu-uh-mmy.
September 24th, 2009 at 12:49 pm
scepticus,
Your timing may be a little off there: I am at the tail end of the boomers and started working in 1980. That was when the boomers had some experience, the economy got better, and they started making some decent money to put in investments.
September 24th, 2009 at 12:50 pm
Sadly…
The blue line simply looks like “Wave 1″ of an EW…
September 24th, 2009 at 12:51 pm
WORSE…
The red line doesn’t even look like a COMPLETED Wave 1
September 24th, 2009 at 12:54 pm
CRs graph (from US census I think) shows that in 1980 the 20-24 age group was the largest of all age groups, which would imply they started entering the workforce in large numbers from 1975, which I guess kind of ties up with your recollection.
September 24th, 2009 at 1:10 pm
some interesting Charts to go with the ones above
http://nowandfutures.com/key_stats.html
http://nowandfutures.com/key_stats.html#ratio
September 24th, 2009 at 1:10 pm
Net worth increases, and gets some headlines, but disposable income is down and gets some sidelines. From BEA: Personal income increased $3.8 billion, or less than 0.1 percent, and disposable personal income (DPI) decreased $4.6 billion, or less than 0.1 percent, in July, according to the Bureau of Economic
Analysis. Personal consumption expenditures (PCE) increased $25.0 billion, or 0.2 percent. In June,
personal income decreased $133.4 billion, or 1.1 percent, DPI decreased $119.9 billion, or 1.1 percent,
and PCE increased $60.9 billion, or 0.6 percent, based on revised estimates.
Wealth effect is no effect if either you’re not willing to borrow against it, or can’t.
September 24th, 2009 at 1:23 pm
Car sales for September, while still horrible, will be helped a little from the high end market.
I think Barry got that Porshe he was looking at….
http://www.marketwire.com/press-release/Truecar-1048012.html
TrueCar Forecasts September 2009 Auto Sales: Domestic Market Share at Historic Low
Luxury Brands Thrive; Sales Are Back to Pre-Cash for Clunkers’ Levels
September 24th, 2009 at 1:27 pm
@Bruce: All those bankers are back to buying Ferrari’s. And why not? They’re all doing very well again. All hail banking bailouts. Mission accomplished.
September 24th, 2009 at 2:01 pm
-Adjusted for inflation? I didn’t think so…
@scepticus:
The seventies saw us leave the gold standard and the growth of stagflation. By the eighties, the most spoiled generation this county had every produced, suddenly got religion and began to use the expensive new educations (that their parents never had opportunity to get) to figure out ways to make money that didn’t involve real work or producing anything of value. The idea was for these “yuppies” as they called themselves to make up for lost time spent at sit-ins, smoking pot and wasting everyone’s time with futile attempts to rearrange the world to fit their youthfully idealistic imaginations. So they quickly shaved their beards and exchanged their tie-dyes and Birkenstocks (or for those “younger” boomers who missed the love fest, disco balls and bell bottoms), donned three-pieced suites and got right to work for the “man” (which they earlier claimed they’d never do) on the arduous and self-congratulatory task of collecting job titles, plastic surgery to perpetually stay young and stuff to show off to their friends and simple hardworking parents. Remember your motto back in the 80s boomers? I sure do… “He who finished with the most toys, wins.” So inspiring!
From that time on, the boomers by way of their overwhelming numbers where easily able to keep electing inept leader whose only task was to flatter them and construct nearly every bit of legislation, foreign and domestic policy, so as to suit their generation’s needs and tastes, no matter what the consequences.
By 2001, with the dissipation of the first great bubble and no clear view to easy riches in sight, the educated boomers, by now occupying positions of real power and influence decide the best thing to do is to organize, fund, and encourage the government to create an even bigger bubble than the last so they could make a last ditch effort to cash in easy before they’re too old to compete with the rest of us.
By 2009, many boomers have cashed in on their sleazy housing gains (sleazy since they were the product of a housing boom deliberately fomented by their elected leaders to bilk younger generations and recent immigrant out of their salaries for years to come) and can retire by now in some fashion despite their poor savings from income performance. But not all is well, as many boomers were not able cash out or were not in a position to do so and to help ensure that they are not penalized, their government will again do everything in its power to squeeze the rest of us to ensure these do not have to suffer too greatly.
Before you boomers start to flatter yourselves for the stellar growth of NOMINAL wealth over the past 56 years, it may be sobering to learn that the rest of us are patiently waiting for the moment when we can finally take away the car keys and outsource you to convalescent homes in third world countries and can finally get to down to work cleaning up the mess you made.
September 24th, 2009 at 2:11 pm
The net worth numbers don’t look like they’re adjusted for inflation.
Anybody know for sure? I’d much rather see the chart in constant dollars.
September 24th, 2009 at 2:40 pm
Global Financial crisis has been a period of volatility and uncertainty for millions of homeowners as real estate and mortgage industry is at an all time low. Foreclosures and negative equity is norm of the day. Situation is likely to spike lower within next two years.
Subprime crisis however will not affect everyone who has bought a home. It depends entirely on intention of buyer. In case homeowner intends to stay in the house for considerable amount of time say five to seven years they will balance out loss on their property. This also stands true for those who did not borrow against mortgage. So there is no negative effect unless one intends to sell off home immediately. Risk involved will have less to do with your financial position but more with external factors like sinking economy or failing neighborhood.
Read More : http://www.housingnewslive.com
September 24th, 2009 at 2:45 pm
Bruce: there is actually good news in that piece as stated, supporting economic improvement that wasn’t expected at the beginning of the month.
September 24th, 2009 at 2:53 pm
Harry:
Shut up.
Bruce
September 24th, 2009 at 3:22 pm
BinT:
Best comment of the day.
September 24th, 2009 at 3:52 pm
“I’d much rather see the chart in constant dollars.”
God help me, I’d like to know what a frigging constant dollar is. See how difficult it is to know anything, anything at all, when the Fed spends its every waking moment trying to queer up the accounting? I mean, so what if net worth looks higher–net worth is counted in dollars, and I haven’t a clue how to make a meaningful comparison between past and present dollars. I wonder if it’s just a coincidence that $2 trillion–the purported increase in net worth–is also about the same amount by which the Fed’s balance sheet has expanded. If the correlation has any causation, then the whole analysis is an exercise in futility. Next quarter, the Fed could print another $2 trillion just so the “net worth” will continue to appear to be climbing.
@Had Enough–nice rant.
September 24th, 2009 at 3:59 pm
Well, I know about $0.05 of it is mine.
September 24th, 2009 at 4:15 pm
@Had Enough: Ditto. That’s a rant for the ages right there.
September 24th, 2009 at 4:23 pm
Hey BR! I suspect this may be the news tidbit to spark the “Mother of All Corrections” -
U.S. stock market hammered by disappointing housing data
http://www.marketwatch.com/story/us-stock-investors-find-cracks-in-housing-market-2009-09-24
Gaggin’on those green shoots and the ol’ brother Fed’s oversight…I see a revolution in the works here!
September 24th, 2009 at 4:35 pm
@Had Enough:
Brilliant!
September 24th, 2009 at 4:58 pm
Had Enough…
Remember, there are 75 million of us. There are probably a few dozen who didn’t sell-out.
September 24th, 2009 at 7:18 pm
@Had Enough…
Perfect
@ Harry Wanger
If you attempt to move your eyes about a foot ABOVE your computer screen, you’ll see that MIRACULOUSLY, the red line there, actually bends back on itself and will hit something like a 140 number in the year 2050… Hell, it may end up doing a full aerodynamic “loop de loop”…
They’re sure to name a new mathematical science on it, like… “Wanger Calculus” or something…
Please honor me with an invitation to witness your gold medal ceremony in Oslo…
September 24th, 2009 at 8:19 pm
scepticus,
I see now. Peak births was 1956, and 1958 births were still quite high. So even though I was at the tail end, like always, it was the baby boom going out with a bang, so to speak.
September 25th, 2009 at 4:37 am
I think it is too optimistic to say to build houses now because the uptick you have seen in June is because of the fact that Americans buy houses mostly in summer. So, America has always seen uptick in these months. I would say that we should wait and watch after 2-3 months.
September 25th, 2009 at 9:39 am
[...] Household wealth–improving from a low base (graph): http://www.ritholtz.com/blog/2009/09/household-net-worth-financial-and-tangible-assets/ This is a little long but it is a good balanced view of the [...]
September 27th, 2009 at 1:30 am
Is this inflation adjusted? At first glance the household wealth trend mirrors the inverse of $ purchasing power.