Due largely in part to sustainable increases in home and stock values, households on a national level increased their net worth by $1.3 trillion in the spring. According to the Federal Reserve, the spring numbers reflect a net worth of approximately $74.8 trillion in the quarter between April and June. Those numbers are up 1.8 percent from the first quarter of 2013. Adding further optimism to the current recovery, home prices and stock markets continue to improve, suggesting that our net worth as a nation continues to increase.
While the gains in wealth are particularly encouraging, they are not evenly distributed amongst all of the social classes. Homeownership has declined as a result of the recent financial crisis. Low-income Americans, in particular, experienced the largest drop in the rate of homeownership. Conversely, 10 percent of the wealthiest households continue to own about 80 percent of stocks. The separation of wealth is only increasing.
Americans’ wealth bottomed at $57.2 trillion during the recent bubble crisis. It has since risen $17.6 trillion to get to where it is today.
For those unfamiliar with the term net worth, as it pertains to Americans as a whole, it refers to the value of assets like homes, stocks and bank accounts. It also takes into consideration debts like mortgages and credit cards. The resulting number will reflect the net worth on a national level.
Greater net worth can boost consumers’ willingness and ability to spend. That could accelerate economic growth. Some economists say higher household wealth enabled Americans to spend more this year despite higher Social Security taxes and higher income taxes on wealthier Americans that took effect at the start of the year.
The gains in home values between April and June reached $525 billion, while stock and mutual fund portfolios surged $300 billion. These trends appear to be sustainable, contributing to the recovery as a whole.
Americans also took on slightly more debt last quarter. Of course, this is largely due in part to auto, credit and student loans.