Growth In Household Assets Is Starting To Rebound

Household assets are starting to rebound, but erosion of stocks, savings and pensions has taken a toll on net worth for US families. Increasing nearly 10 percent from …

Household assets are starting to rebound, but erosion of stocks, savings and pensions has taken a toll on net worth for US families. Increasing nearly 10 percent from the 2009 low, household assets are regaining ground lost since the 2007 housing price peak. See the following article from HousingWire for more on this.

The net growth for household assets edged up 9.6% since the bottom of 2009 as total liabilities declined, according to a recent trend study from the Federal Reserve Bank of Cleveland.

Daniel Carroll, a research economist with the Cleveland Fed, examined trends in household net worth and found that household assets grew in the second quarter of 2010. However, liabilities also increased and that means less money in the hands of consumers.

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During the housing bubble’s peak in 2007, household assets grew by 64%, and liabilities increased 66%. But because liabilities were still smaller than assets, household net worth still climbed. So when homeowners sold their homes, they could generally profit from high housing prices.

Then came the housing crisis. Carroll’s report said in the first quarter of 2009, household assets had lost 21% of their value from the peak. But as total liabilities stayed the same, household net worth fell by almost 26%.

Although household assets are slowly increasing today, many homeowners are still underwater. But this decline in value for the household’s tangible assets, such as real estate and durable goods, did not have as much affect on a family’s net worth as drops in financial assets.

Carroll found that four subcategories of financial assets — corporate equities, pension fund reserves, mutual fund shares, and deposits — declined last quarter.

The total loss from those four sources was $1.97 trillion, Carroll’s study said, and 80% of that came from corporate equities and pension fund reserves.

Despite declines in investments like pension funds, the stock market or even savings accounts, Carroll expects to see household net worth to continue trending upward in the third quarter.

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.

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