The Morning Economic Report
9:28 am
Sat March 22, 2014

Household Wealth - 3/21/14

According to the Federal Reserve’s latest quarter report regarding U.S. finances, household wealth expanded 13.8 percent last year, the fastest rate of growth in American wealth since 2004.  Rising equity and home prices contributed heavily.  The value of stocks and mutual funds held by individuals rose by more than 30 percent, which according to Moody’s Analytics represents the largest dollar increase in history.  Homeowners’ equity grew 29 percent, with gains on part with those registered during the boom times of the previous decade.

As a result of several years of wealth expansion, American households are collectively as well off as they were before the financial crisis.  Per capita wealth adjusted for inflation is back to the peak achieved during the first quarter of 2007.  But here’s the thing – the composition of wealth has shifted dramatically since that time.  Real estate value, upon which the middle class depends disproportionately, is still well below its prior peak.  But assets tied to the stock market, which are disproportionately owned by wealthier families, have zoomed above pre-recession highs.  Many economists expect, however, that this year, home values may rise faster than stock prices.