Household Net Worth Hits Record $145 Trillion, Up $34 Trillion Since COVID... But There Is A Catch

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by Tyler Durden
Thursday, Dec 09, 2021 - 07:00 PM

Another quarter, another record high in (1%er) household net worth.

The Fed's latest Flow of Funds report released at noon today showed the latest snapshot of the US "household" sector as of Sept 30  2021, which confirmed that one year after the biggest drop in household net worth on record when $8 trillion was wiped out in Q1, 2020, in the 3rd quarter of 2021 the net worth of US households soared by another $2.362 trillion (a slowdown from the $6.140 trillion in Q2), or 1.7%, rising to a new all time high of $144.7 trillion.

As has traditionally been the case, real estate ($36.8 trillion) and directly and indirectly held corporate equities ($46.7 trillion) were the largest components of household net worth. Meanwhile, household debt was $17.6 trillion.

This means that over the past 18 months, US household net worth has increased by:

  • Q2 2020: $8.0TN
  • Q3 2020: $4.33TN
  • Q4 2020: $8.0TN
  • Q1 2021: $5.3TN
  • Q2 2021: $6.14TN
  • Q3 2021: $2.36TN

... a grand total of $34 trillion. And since the bulk of this wealth goes to a fraction of the wealthiest 1% (see chart at the bottom), it means that the covid pandemic has been the biggest wealth transfer in history, making America's richest even richer.

Looking at the composition of the $2.4 trillion change in wealth,  $1.4 trillion came from the gains in home prices, while the The value of directly and indirectly held corporate equities decreased by $0.3 trillion, in line with the decline in stock prices in Q3. This was the first drop in the value of household equity assets since the covid crash and was driven largely by the brief panic surrounding Evergrande which took place at the end of September and briefly hit stocks which closed Q3 slightly lower.

And visually:

Of course, in addition to assets, liabilities also grew, and in Q3 2021 household debt grew at a 6.2% SAAR, a touch less rapidly than in the first half of the year. Home mortgages increased by 7.8%, spurred by rising home prices and sale activity, and nonmortgage consumer credit increased by 5.3%, as credit cards, auto loans, and student debt all increased.

Nonfinancial business debt grew at a rate of 3.9%, reflecting continuing growth in commercial mortagages, nonbank loans, and corporate bonds and a decline in nonmortgage depository loans. Federal debt edged down by 1.3%. State and local debt increased 1.7%. As GDP continued to grow, the ratio of nonfinancial debt to GDP edged down a bit further. In the second quarter of 2020, the ratio had spiked, driven by the drop in GDP and the expansion in federal debt related to the fiscal stimulus.

Looking at the various components of non-financial business debt, non-mortgage depository loans to non-financial business decreased $100 billion in the third quarter. Contributing to the decline was the continued forgiveness of many loans extended under the Paycheck Protection Program (PPP). In contrast to nonmortgage depository loans, corporate bonds, commercial mortgages and nonbank loans continued to increase.

Overall, outstanding nonfinancial corporate debt was $11.4 trillion. Corporate bonds, at roughly $6.7 trillion, accounted for 59% of the total. Nonmortgage depository loans were about $1.0 trillion. Other types of debt include loans from nonbank institutions, loans from the federal government, and commercial paper.

The nonfinancial noncorporate business sector consists mostly of smaller businesses, which are typically not incorporated. Nonfinancial noncorporate business debt was $6.8 trillion, of which $4.8 trillion were mortgage loans and $1.5 trillion were nonmortgage depository loans.

Of course, as every other quarter then the Fed parades this report of America's ever growing wealth, there is a catch.

Because while it would be great if this wealth increase was spread equally across most Americans, the truth is that most Americans aren’t benefiting from recent gains in wealth, and while the pandemic has led to a surge in savings and opportunities for many to buy a home or invest while pushing up the financial assets of the "top 10%" to record highs, the downturn has disproportionately impacted low-income workers, many of whom rent and don’t participate in the stock market.

Indeed, the latest data as of Q2 shows that the top 1% accounts for over $46 trillion of total household net worth, with the number rising to over $101 trillion for just the top 10%. Meanwhile, the bottom half of the US population has virtually no assets at all. On a percentage basis, just the Top 1% now own a record 32.3% share of total US net worth, or $46.74 trillion. In other words, the richest Americans have never owned a greater share of US household income than they do, largely thanks to the Fed. Meanwhile, the bottom 50% own just 2.3% of all net worth, or a paltry $2.3 trillion. They do own most of the debt though.

A closer look at the percentile breakdown:

And the saddest chart of all: the wealth of the bottom 50% is virtually unchanged since 2006, while the net worth of the Top 1% has risen by 132% from $17.8 trillion to $43.3 trillion.

Bottom line: the data underscore how the government's fiscal scramble to speed up the "economic recovery" paired with the Fed's continued ultra easy monetary policy have helped to protect and grow the wealth of the richest Americans: those who own assets, and who have seen their net worth hit an all time high... unlike the bottom 50% of Americans who mostly "own" debt.