From 2019 to 2022, the net worth of the typical American household grew at the fastest rate in more than three decades, but it was relatively low interest rate Loans at the time made it easier for households to repay debt, according to a government report on Wednesday.
The wealth of the median household – the midpoint between the richest and poorest households – jumped 37% over the three years to nearly $193,000. Fed report in its Consumer Finance Survey. (These numbers have been adjusted for inflation.)
The increase largely reflects increases in home values and stock prices, as well as an increase in the share of Americans who own homes and stocks. By the end of 2022, one in five households directly owned stocks, while a surge in property prices pushed house prices to record highs.
The jump in wealth came despite a brief but brutal pandemic recession that cost 20 million Americans their jobs in 2020. Massive government rescue aid totaling about $5 trillion has helped spur a rapid recovery, restoring lost jobs much faster than in the aftermath of the financial crisis. The 2008-2009 recession. However, the extra spending is believed to be fueling the worst inflation in four decades.
Broad wealth growth helps explain the surprising durability of the U.S. economy this year and expenditures About two-thirds of the electricity. Economists have been warning of a coming recession for at least a year. Yet the economy has been developing steadily.
Economic growth in the just-ended July-September quarter is likely to exceed a strong annual rate of 4%, driven by strong consumer spending on physical goods and services across a wide range of services including air travel, entertainment, restaurant dining and others experience.
Government stimulus payments in the wake of the pandemic have also boosted household finances. Median holdings of checking accounts, savings accounts and other cash have soared 30%, according to a survey conducted every three years by the Federal Reserve. With borrowing rates at historically low rates, Americans will spend just 13.4% of their income on debt repayments in 2022, the lowest ratio since the Fed survey began in 1989.
asset bubble
Soaring home prices are another factor, with Americans’ median “net home value,” or what their home is worth minus the debt owed, set to hit a record $201,000 in 2022, up 44% from 2019. wrote, “Affordability hits historic lows as median home value exceeds 4.6 times median household income.”
More Americans are buying individual stocks in the wake of the pandemic — which may, in part, reflect the stimulus checks that fueled the “meme stock” craze. The survey found that the proportion of households holding stocks directly (rather than through mutual funds) jumped from 15% to 21%, a record high.
The Fed reports that the median value of individual stock holdings is $15,000. The survey found that the average value of direct stock ownership was much higher at $404,000, reflecting the holdings of wealthy households.
High wealth inequality persisted during the survey period, reflecting decades of widening gaps between the richest households and everyone else. In 2022, the median wealth of the richest 10% of households reached nearly $3.8 million.
In percentage terms, black and Hispanic households have experienced greater increases in household net worth than white households, although in dollar terms the gap remains wide. The median net worth of black households jumped 60% but remains relatively low at $45,000. For Hispanics, that number jumped 47% to nearly $62,000. Among white households, median household net worth increased 31% to $285,000.
The Fed’s survey found that while wealth inequality fell, income gaps worsened. Median income increased 3% compared to the previous survey in 2019. But average incomes, driven by gains from the richest tenth of households, jumped 15%. The huge gains for the richest households have been driven by profits from stock and property holdings, as well as higher wages.
However, Fed officials noted that the report’s revenue data was also more complex than usual. For example, it doesn’t capture the impact of stimulus checks. The report focuses on earnings in 2021, when many Americans are still dealing with job losses from the pandemic recession.
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