Fed: Household Net Worth Off $14 Trillion

Calculated Risk ^ | 6/11/09

[FromLori]

The Fed released the Q1 2009 Flow of Funds report today: Flow of Funds.

According the Fed, household net worth is now off $14 Trillion from the peak in 2007.

Click on graph for larger image in new window.

This is the Households and Nonprofit Net Worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

This ratio was relatively stable for almost 50 years, and then ... bubbles!

Household percent equity was at an all time low of 41.4%.

For blocked image users: Household Percent Equity

This graph shows homeowner percent equity since 1952.

When prices were increasing dramatically, the percent homeowner equity was declining because homeowners were extracting equity from their homes. Now, with prices falling, the percent homeowner equity is Cliff Diving!

Note: approximately 31% of households do not have a mortgage. So the 50+ million households with mortgages have far less than 41.4% equity.

For blocked image users: Household Real Estate Assets Percent GDP

The third graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP is now declining rapidly. Mortgage debt declined, but increased slightly as a percent of GDP in Q1.

[FromLori]

Graphs at site

[Steve Van Doorn]

very interesting. I do expect it to go down past 1995 level then come up and hold steady at 1995 levels.

that is my guess.

[JasonC]

At the March low, US households had net worth of over $50 trillion. The market is up $3 trillion since then. The personal savings rate is also now running $700 billion a year, up from zero this time last year.

These are not figures compatible with a thesis of dire poverty. Whenever the doom mongers cite them, they have to be very careful not to let anyone notice the absolute level. And they only ever cite this figure in a quarter in which it went down.

Long term, US household net worth has increased at a rate of 7.5% since 1945. Every decade. Despite war, stock market crashes, inflation, housing market crashes, periods of zero savings rates, you name it.

The 2000 to 2002 smash sliced over $7 trillion off household net worth, but it is higher now than it was at the 2000 peak, by over $15 trillion. That's right Virginia. Despite 2 stock market crashes and a busted real estate bubble, today we own $15 trillion more - 40% more - than we did in the spring of 2000 when the Nasdaq hit its nosebleed peak.

The fact the doom mongers cannot grasp is that everything is owned. There is no such thing as a net debt.

[JasonC]

Hopelessly wrong. We are vastly richer today than at the previous stock market peak in 2000, let alone before than run-up occurred.

[FromLori]

U.S. Debt $668,621 Per Household
No that’s not a typo: that’s the statistic according to USA Today. The folks over there have done some really great work this week with another interesting interactive chart attached to an article about the nation’s debt. If they keep this up, I’ll have to stop considering it a useless free newspaper I step over when leaving a hotel room. The numbers it reports are staggering.

Again, I wish I could include the interactive chart it shows, but it breaks down the $668,621 by various components of federal government debt ($546,668) and personal debt ($121,953). Presumably that means this astronomical figure does not even include state and local government debt. I thought it might be fun to put this number into perspective.

http://business.theatlantic.com/2009/05/us_debt_668621_per_household.php

Really how much do that have after debt?

[JasonC]

Made up single entry accounting nonsense.

US households own $450,000 *more* than *all* their debts, each, average.

Not made up anything, the Z.1 flow of funds data kept religiously by the Fed every quarter since the end of WW II, based on every transaction that touches the banking system.

The only way you can arrive at silly made up figures like yours is to first turn every promised middle class entitlement into an "unfunded liability" and then flat ignore that it can't be an unfunded liability to the government without being an unreported asset to the benefit receiver.

Which is known as "one entry accounting" and it an utter fraud.

[muawiyah]

Problem with "household" anything. We have about 70 million "households" but about 19 million of them are vacant.

That is, the people living there moved out and went somewhere else.

[Petronski]

Long term, US household net worth has increased at a rate of 7.5% since 1945.

Average annual rate, right?

[Petronski]

We have about 70 million "households" but about 19 million of them are vacant.

So, (roughly) two in seven American households are vacant? Where is your citation?

[muawiyah]

There in here somewhere on a post I made about 3 weeks ago. Should be relatively easy to find out how many dwelling units there are (check postal statistics regarding stops on routes, exclude business routes). Then, find out what private sector says about how many overbuilt dwelling units there are. I found quite a few sources on that. Most circled around 19 million.

At the current rate of sale we have about a 15 year overbuilding problem.

[BipolarBob]

Note: approximately 31% of households do not have a mortgage

Does that seem like an awfully high figure? I mean are they saying a paid off mortgage or that they are renting?

[Petronski]

~27% of U.S. households vacant?

That’s a big number.

I don’t buy it.

[muawiyah]

You don’t? Did you imagine there was something wrong with the housing market besides subprime loans?

[Petronski]

I’ll discuss 27% with you when you post (in this thread) some proof.

I’m not going to debate hypotheticals with you.

[muawiyah]

You were late for the debate on that debate anyway. I'm satisfied there was substantial overbuilding, and with a serious economic downturn you have considerable household consolidations as the dispossesed move in with relatives and/or friends.

If it were otherwise the home prices should have stopped dropping this winter.

[Petronski]

So 19M out of 70M will have no proof on this thread?

Okay.

[muawiyah]

You can try this February 2009 article
http://www.usatoday.com/money/economy/housing/2009-02-12-vacancy12_N.htm

[muawiyah]

It's gotten worse since February ~ this is June and foreclosures have proceeded at a RECORD RATE, the American people have lost $14 trillion bucks, people are consolidating quarters like crazy, etc.

Yeah, it's an unmitigated disaster in the housing market ~ America has more housing than it will need for the next 15 years or more.

[Steve Van Doorn]

hopelessly? I usually respect your opinion you know that but if you notice by the chart we are already near 1995 levels.

[muawiyah]

127,901,934 housing units per Census bureau in 2007. Last government official report. There are, of course, fewer POSTAL DELIVERY UNITS because of the nature of the housing involved.

Knew something wrong withthat number 70 mil. Still, that last ref I gave you adds up to 19 million vacancies which is 15% of total.