Thursday, September 26, 2013

Household Net Worth Rose by $1.3 trillion in Second Quarter

Household net worth grew by $1.3 trillion in the second quarter of 2013 to a record $74.8 trillion, according to the Federal Reserve’s Flow of Funds report. The gain continues an upward trend since the beginning of 2009 and is $5.8 trillion above the pre-recession peak.

The gains in household net worth were let by rising home prices and the stock market recovery. Residential real estate increased household wealth by $525 billion. The S&P/Case-Shiller index of home values in 20 cities rose 12.4% in July from the same month in 2012, the most in more than seven years. Americans hold more of their wealth in their homes, as the household real estate as a percentage of household real estate holdings hit 49.8% from 48.1% a quarter earlier.

The stock market added almost $300 billion. The Standard & Poor’s 500 Index climbed 2.4% from March 29 through June 28, following a 10 percent increase in the first quarter. The trend is expected to continue through the third quarter, especially with large stock market gains once the Fed announced it was postponing the anticipated taper date.

Liabilities also rose for the household sector as families become willing to take on more debt. Household borrowing grew at an annualized rate of 0.2% in the second quarter, after declining in the first. The increased borrowing was driven by the 5.6% increase in student and auto debt.

Read the Federal Reserve’s release.

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