Rising Stock Market And Housing Recovery Bring U.S. Household Net Worth To A New Record High

|
Includes: IYR, SPY
by: Mark J. Perry

The Federal Reserve released data today for the net worth of U.S. households in Q1 2013. Here are some highlights:

1. The net worth of U.S. households -- the value of homes, stocks, bonds, savings accounts, and other investments minus household debt -- increased to $70.35 trillion in the first quarter. That's an increase of $6.2 trillion, and 9.6%, from the same quarter in 2012 (see chart below).

2. Household net worth in Q1 of $70.35 trillion established a new all-time record high (in nominal dollars), and was $3.1 trillion, and 4.5%, above the previous high of $67.3 trillion in Q3 2007 before the Great Recession started and caused household net worth to collapse by $16.1 trillion (and by 24%) to a cyclical low of $51.2 trillion in the first quarter of 2009.

3. As a result of rising home prices in the first quarter of this year by about 10% (according to CoreLogic's repeat-sales home price index), the value of real estate owned by U.S. households increased to $18.45 trillion during the January-March period, up by $1.86 trillion and 11.2% from the same quarter a year earlier when home values totaled $16.59 trillion. Household real estate values are now at their highest level since 2007. With about 78 million U.S. households owning homes, the $1.86 trillion in real estate appreciation over the last year through Q1 2013 would translate into an average gain in home value of almost $24,000 per household.

4. The value of equities and mutual funds owned by U.S. households increased by more than $2 trillion over the last year, and by 14.0%, from $14.93 trillion in Q1 2012 to $17.02 trillion in Q1 this year.

5. The total value of all financial assets owned by U.S. households increased by $4 trillion over the last year, from $53.7 trillion in Q1 2012 to $57.7 trillion in Q4 2012.

In nominal terms, U.S. households have not only gained back all of the $16 trillion of net worth that was lost during the Great Recession, financial crisis, and collapse of housing values in 2008-09, but they are now $3 trillion ahead of the previous pre-recession peak in 2007. At $70.35 trillion, household net worth (an average of almost $600,000 per household) set a new record high in the first quarter of this year. With further gains during the second quarter of 2013 in a) stock prices -- the S&P is up year to date by 13.5% -- and b) home prices -- the CoreLogic home price index was up 12% in April and its pending home price index predicts a 13.2% gain in May home prices -- we can expect further gains in household net worth in the second quarter of this year.

In related news, Scott Grannis commented that the increase of household net worth to a new record high is "a testament to the dynamic nature of the U.S. economy, which in turn reflects the ability of businesses, workers, and consumers to overcome adversity and forge ahead. In my experience, it never pays to underestimate the inherent dynamism of the U.S. economy. It only took four years to recover from the most devastating recession in modern times, and the near-collapse of the global financial system. The recovery has been painfully slow, but there is no reason to think it won't continue."