Net worth is up

The estimated net worth of the American household rose again during the first quarter of this year. This marks the fourth quarter in a row that total household wealth increased — following seven consecutive quarters of declines.

Total household net worth now stands at $54.6 trillion, an increase of $1.1 trillion versus the prior quarter’s $53.5 trillion total.

Net worth is derived from the Federal Reserve’s quarterly flow of funds report. The total represents the difference between all household assets, including stocks, mutual funds, real estate, CDs, etc., minus all debts, including home mortgages, consumer debt, bank loans, etc.

The first quarter increase was driven by rising stock values. Stocks owned by households gained an estimated $330 billion in value, a 4.4 percent rise, during the January to March period. The Dow rose 428 points (up 4.1 percent) to 10856 during the first quarter, but fell sharply during the second quarter to close at 9774 on June 30, before rising again in recent days. Household net worth for the second quarter (to be released in September) will be negatively impacted by the poor performance of the stock market during the April to June period.

Real estate owned by American households declined in value by 0.4 percent during the first quarter, shaving $65 billion from total net worth. Household real-estate holdings had been gaining in value during the previous three quarters and had added $888 billion to net worth before the first quarter decline.

In addition, households reduced total debt at a 2.9 percent annual rate during the first quarter, with reductions in both mortgage debt and consumer credit. Consumers have been aggressive, where possible, in paying down debt during the past few years in response to serious recession, painful job cuts, and higher levels of anxiety.

The rise in net worth is a positive sign and will likely be followed by more gains in coming quarters as the housing and stock markets rebound. Still, the $54.6 trillion total is 17 percent below the peak of $65.9 trillion during 2007’s second quarter, just before the Great Recession hit. It may take “awhile” to get back to that level.

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