Market Conditions

American Households Gain $1T In Wealth

The Fed

Bolstered by increasing home values and stock prices, The Fed said that American households gained $1 trillion in wealth over the first three months of 2018. Overall, household wealth in the U.S. was just over $100 trillion in a period spanning from January to March, Reuters reported.

Over the first quarter of the year, financial assets held by households also increased by $511 billion. At the same time, value of real estate increased by $490 billion. Additionally, the liquid assets of non-financial firms rose from $2.6 trillion in the fourth quarter to $2.7 trillion. In general, wealth has been on the rise in the U.S. since the financial crisis of 2007 to 2009, and the labor market continues to improve: The jobless rate reached 3.8 percent in May.

The news comes as the wealth of people living in the U.S. increased in the fourth quarter of 2017, due in part to surging stocks and increasing property values. According to a report in The Wall Street Journal (WSJ), citing Federal Reserve data, household net worth rose more than $2 trillion in the fourth quarter to more than $98 trillion, which was a record. In addition, households in the U.S. saw their net worth increase to close to seven times their disposable personal income last year. At the same time, the rate of savings among Americans declined in 2017 to 3.74 percent from 5.98 percent in 2016. In 2015, the savings rate stood at 7.19 percent.

The WSJ noted that past recessions were preceded by times when asset values were rising but saving was at low rates. This time, however, the gap between savings and household wealth is wider. The paper pointed to the first quarter of 2000, the year before the economy slid into a recession, because of the bursting dotcom bubble. At that time, wealth was more than six times disposable income.


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