Household Net Worth Hits A Record $95 Trillion... There Is Just One Catch

In the Fed's latest Flow of Funds report, today the Fed released the latest snapshot of the US "household" sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs .

At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

The breakdown of the total household balance sheet as of Q2 is shown below.

And the historical change of the US household balance sheet.


And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans.

As a reminder, from the CBO's latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the "average" American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed:

  • In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent.
  • Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America's financial net worth,

Even worse, when looking at how wealth distribution changed from 1989 to 2013, a clear picture emerges. Over the period from 1989 through 2013, family wealth grew at significantly different rates for different segments of the U.S. population. In 2013, for example:The wealth of families at the 90th percentile of the distribution was 54 percent greater than the wealth at the 90th percentile in 1989, after adjusting for changes in prices.

  • The wealth of those at the median was 4 percent greater than the wealth of their counterparts in 1989.
  • The wealth of families at the 25th percentile was 6 percent less than that of their counterparts in 1989.
  • As the chart below shows, nobody has experienced the same cumulative growth in after-tax income as the "Top 1%"

The above is particularly topical at a time when either party is trying to take credit for the US recovery. Here, while previously Democrats, and now Republicans tout the US "income recovery" they may have forgotten about half of America, but one entity remembers well: loan collectors. As the chart below shows, America's poor families have never been more in debt.

The share of families in debt (those whose total debt exceeded their total assets) remained almost unchanged between 1989 and 2007 and then increased by 50 percent between 2007 and 2013. In 2013, those families were more in debt than their counterparts had been either in 1989 or in 2007. For instance, 8 percent of families were in debt in 2007 and, on average, their debt exceeded their assets by $20,000. By 2013, in the aftermath of the recession of 2007 to 2009, 12 percent of families were in debt and, on average, their debt exceeded their assets by $32,000.

 

The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity and rising student loan balances. In 2007, 3 percent of families in debt had negative home equity: They owed, on average, $16,000 more than their homes were worth. In 2013, that share was 19 percent of families in debt, and they owed, on average, $45,000 more than their homes were worth. The share of families in debt that had outstanding student debt rose from 56 percent in 2007 to 64 percent in 2013, and the average amount of their loan balances increased from $29,000 to $41,000.

And there is your recovery: the wealthy have never been wealthier, while half of America, some 50% of households, now own just 1% of the country's wealth, down from 3% in 1989, while America's poor have never been more in debt.

Comments

sessinpo Jun 9, 2017 1:37 AM Permalink

"the net worth of the average US household rose to a new all time high of $94.835 trillion" "Average wealth was about $4 million for families in the top 10 percent of the wealth distribution"Hmm

NYC_Rocks Jun 8, 2017 9:48 PM Permalink

This is a poorly understood topic across the country.  Reporters in the mainstream media are especially ignorant.There is no such thing as "wealth inequality."  It's propaganda used by the politicians to win votes. There will always be rich and poor (assuming you make arbitrary thresholds). Why?  It's simple.  Because we are all different.  We are inherently NOT equal.  Some people are smarter than others or work harder than others.  Entrepreneurs have ideas or skills that others don't have.  Do CEOs and company owners pay their employees the same salary and bonus?  No because it destroys all incentive and interferes with productivity inherent in the division of labor.  An intern is NOT equal to an experienced engineer.  They need to work hard to acquire more skills, produce more and, as a result, earn more wealth.Inequality is the natural order of the free market.  The person who studies biology, science and medicine for 10+ years to be a doctor should earn more than the person who does not not work hard acquiring an education or skill and prefers to do something that is less productive.  Incentives to work drive different incomes.  Incentives are required to work or you don’t find solutions to problems.  If we all received $1M per year from the government, there would be no incentive to work and no wealth would be produced and the system would collapse on itself.  You need division of labor to be efficient (the labor skills are inherently unequal but is more productive as a whole).Note also that know one can define the "inequality."  For every person with a certain amount of wealth there is always someone else who has more and less.  The thresholds (usually set by government agencies) are completely arbitrary.  They are meaningless.  No one has the right to define "rich," "middle class" or "poor."  It's all relative. Wealth is also not capped.  It's infinite (but can only be created at rate that is linked to our ability to create, innovate and build).  The founders of Google created new wealth and didn't take it from anyone.  There are lots of ideas to come that will create wealth.Now this is important...Wealth distribution is explained by the Pareto principle (80/20 rule).  It's absurd to assume the rich get richer because if being rich makes one richer, there would be one person in the world with all the wealth. The idea makes no sense, since having wealth means the ability to get stuff and do stuff, which requires that you trade with others – who clearly would need something of value to trade with, which is wealth. The conclusion one draws from the Pareto principle is that wealth distribution never changes - 20% of the population will always control 80% of the wealth of the population. Again, there is no "inequality."  Rich people get richer AND poorer, poor people get poorer AND richer. There is nothing static implied by the principle apart from the ratios.  Saying otherwise would be like divining that the word “the” (the most popular word in the English language) will eventually be the only word we use.  I suggest researching the Pareto principle (there is a great video on YouTube, although it makes a mistake when it says "the rich get richer" which is not correct).Crony capitalism is the cause of “inequality” beyond the 80/20% norm (but the norm is not equality – this is impossible). Crony capitalism interferes with the free market and allows those with wealth to buy power to extract wealth by force from others (through involuntary governments - the state).  Wealth created / earned voluntarily is fair game. The state obtains it's money through violence/aggression and reallocates the stolen funds (try not paying taxes and see what happens - you go to jail). The state only transfers wealth. The state gets bribed by outsiders to pass regulations to help them make more money than they should (monopoly power). The state, therefore, promotes the wealth inequality. It's ironic that politicians want to fix this by stealing more money from the people.Those fighting for equality are sponsoring a performative contradiction.  How do these people justify what they have compared to those that have less than them?  They walk around with two eyes and two kidneys and don’t need them both, but you don’t see them donating them to those in need.  I realize it’s a harsh example, but it makes the point clear.  Those who complain about inequality need to look themselves in the mirror and compare themselves to those who have less than themselves and give up something of their own before lobbying government to take that money by force from others (taxation) and redistributing it to others.  This country needs to stop complaining about wealth inequality and start focusing no crony capitalism.

NYC_Rocks Bunga Bunga Jun 8, 2017 9:58 PM Permalink

False.  People don't just store their wealth in money (which, yes, when it's fiat money is just debt on the other side of the ledger).  They store the wealth in stocks, assets like homes, art, diamonds, gold, cars etc and other investments (anything that is not currency).  So net worth does not go to zero when all debts are paid back.  Theoretcially all the fiat currency disappears if all the debt is paid back, but we have produced great wealth (built homes, Internet, apps, roads, etc) and that does not go backwards and disappear.  We all work and produce.  Currency is just a medium of exchange and yes, a store of our work, if we hold it.  But wealth is created all the time and remains.  It may get transfered in a collapse of the debt, but it is not destroyed.  Don't mix up wealth with currency.  

In reply to by Bunga Bunga

Let it Go Jun 8, 2017 6:38 PM Permalink

For many American's as good paying manufacturing jobs fled the country for distant shores life has become more difficult. Those who have experienced the slip into an economic quagmire and rough times often will tell you, "I never thought it would happen to me."The number of people living on government transfers of wealth has grown over the years, as of today the National Debt Clock shows that over 163 million people are currently "receiving benefits" and 42 million Americans are food stamp recipients up from 28 in 2008. More on this problem below. http://brucewilds.blogspot.com/2016/02/falling-off-economic-wagon-easier-than.html

Anon2017 Jun 8, 2017 6:12 PM Permalink

"... the net worth of the average US household rose to a new all time high of $94.835 trillion ... ". I doubt it. Not even Bill Gates is worth $94.8 trillion.

ajkreider Jun 8, 2017 2:32 PM Permalink

Gotta love a 2017 chart mixed in with three 2013 charts. I know that was so 10 million jobs and 10,000 Dow points ago.

Ah, integrity in research . . . . it's why we come to ZH.

montresor Jun 8, 2017 2:20 PM Permalink

 They can't liquidate at that valuation.. The debt is real. The equity is false.. The suggestion that equity is worth something in the face of defaulted debt is absolutely crazy. It's just another form of accounting fraud.. Prosperity is measured by the abundance of gainful opportunity..  Somebody with no money but substantial opportunity is actually "wealthier" than those holding abundant paper assets, because the paper assets are designed to conceal a lack of ongoing propserity. That's why people "issue" the paper assets; to falsify the lack of abundance that has killed all hope of future prosperity.. If somebody were prosperous, what need would they have for paper assets? Money was never intended to have a yield.. Money was intended to be a storage house for prosperity not yet consumed..That's why all world societies have used precious metals as money...   The net worth of future American prosperity is actually zero. Because there is no properity, just the false promises of more abundance in the future..  I know a lot of people who look at their big houses, big salaries, and big mortgages as if they actually own something.. In reality they are much poorer than the penniless because they have invested in the falsehood of future abundance... They have refused to accept that even their own personal debts cannot possibly be repaid. Now here we are with total residential sales going toward zero.. It's a Mexican standoff that the sellers have no prayer of winning..  Get a helmet, this one is gonna hurt real bad..

Consuelo Jun 8, 2017 2:15 PM Permalink

  "A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil nor the wine." The $$$cup of the wealthiest will runneth over, whilst the lesser amongst them toil a full day for a meal.     in other words: 'Let them eat cake'...

amadeus39 Consuelo Jun 8, 2017 3:53 PM Permalink

Exactly! Most of the also rans will buy cake and chips and ice cream and cars they can't afford and barbeque grills and boats and other toys...lots of beer, etc. you get the idea. The wealthy will invest in science, innovation, health reasearch. Fortunately, those that make the wisest decisions about wealth allocation have most of the wealth. The average person is all about the now, the now, the now...is all about the me, just the me, only me. Thank goodness we have unequal wealth distribution. Leave wealth in the hands of the few, the brave, the wise. 

In reply to by Consuelo

MrBoompi Jun 8, 2017 2:03 PM Permalink

The values of assets can, and will, go up and down.  If anyone thinks real estate or stocks, what the increase in net assets was composed of, will never go down I have a bridge to sell you.  The other side of the balance sheet is the debt.  Now THAT is not allowed to go down.  Overall debt must be continually created now, and if the private sector won't assume the new debt they will force it down our throats through government "borrowing".  A debt spiral is another term for ponzi scheme since now we must create new debt to satisfy the interest+principal payments on old debts.  And once we put a stop to this, they'll take away benefits such as social security and medicare first.  At some point our income taxes will no longer cover the interest payments, then we'll find out who our owners really are.    

. . . _ _ _ . . . hongdo Jun 8, 2017 4:03 PM Permalink

'Zactly!Everyone (even in Canada) thinks that the highest office in the land is the office of the Prime Minister, it isn't; it's the office of the Governor General.Free country, my ass. And don't think that this doesn't affect the USA either."S.I. 1997 NO.1778 The Social Security (United States of America) Order 1997 Made 22nd of July 1997 coming into force 1st September 1997. At the Court at Buckingham Palace the 22nd day of July 1997. Therefore Her Majesty, in pursuance of section 179 (1) (a) and (2) of the Social Security Administration Act of 1992 and all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered as follows:   "This Order may be cited as the Social Security (United States of America) Order 1997 and shall come into force on 1st September 1997."Does this give a new meaning to Federal Judge William Wayne Justice stating in court that he takes his orders from England? This order goes on to redefine words in the Social Security Act and makes some changes in United States Law."

In reply to by hongdo

brushhog Jun 8, 2017 1:48 PM Permalink

I used to be in the bottom 20 percent when I was young, now Im probably between the 50-90 percent. When Im an old geezer Ill probably be back down in the lower percentile again. The point is, people dont generally stay in the same bracket their entire lives. Its not the same families at each measure. Not everything is a conspiracy to keep you down.

TeethVillage88s Jun 8, 2017 1:45 PM Permalink

Lay the blame on Globalism and the decline from 1979 Employment high in US Manufacturing... all Washington Admins must bear the blame. RESPONSIBILITY.

Brain Dead Federal obsession with Foreign Affairs, Endless Wars, Hegemony, Foreign Aid, and now Foreign Agents funding fake charities & foundations... and CrowdStrike Computer Forensics Investigations of DNC Computers.

"“When we moved in, I was told that using prison labor (sic) at the governor’s mansion was a longstanding tradition, which kept down costs,” Ms Clinton revealed in the book."

Globalism, Crony Capitalism, State Capitalism, Transnational Corporations, World Central Bank System and unlimited FIAT & Financialization of "all the things!"

- Term Limits
- Limits on Money in Politics & Political Organizations
- Reinstate 100 years old rules on conflicts of interest, financial conflicts of interest
- Reinstate Borders
- Reinstate US Constitutional Republic
- Then we can do real data calls and publish the real economic destruction we have to fix

Bam_Man Jun 8, 2017 1:30 PM Permalink

"Net worth of the average household rose..."Totally meaningless.How about letting us know what's happening to the net worth of the MEDIAN household?No, we can't tell you that because it DOESN'T FIT THE NARRATIVE.

TeethVillage88s Bam_Man Jun 8, 2017 2:23 PM Permalink

Good point. "... net worth of the MEDIAN household"

Median Household Income in the United States
https://fred.stlouisfed.org/series/MEHOINUSA646N

Real Median Household Income in the United States
https://fred.stlouisfed.org/series/MEHOINUSA672N

I don't see it.

Income Gini Ratio for Households by Race of Householder, All Races (GINIALLRH) Annual,
2015: 0.479 Units Ratio, Not SA, Updated: Sep 13, 2016 (Not Updated)
https://fred.stlouisfed.org/series/GINIALLRH

America Is the Richest, and Most Unequal, Nation | Fortune.com
http://fortune.com/2015/09/30/america-wealth-inequality/

Gini coefficient, after taxes and transfers[10] (USA is only worse than Chile, Turkey & Mexico)(Wikipedia)

Mexico
Turkey
Chile
United States
Israel
Portugal
United Kingdom
Italy
Australia
New Zealand
Japan
Canada
Spain
Estonia
South Korea
Greece
Poland
Switzerland
Iceland
Germany

In reply to by Bam_Man

small axe Jun 8, 2017 1:22 PM Permalink

this land was made for ...As I went walking I saw a sign there And on the sign it said "No Trespassing." But on the other side it didn't say nothing, That side was made for you and me.In the shadow of the steeple I saw my people, By the relief office I seen my people; As they stood there hungry, I stood there asking Is this land made for you and me?-- W.G

. . . _ _ _ . . . Pollygotacracker Jun 8, 2017 3:28 PM Permalink

"The Canadian national debt when Pierre Elliot Trudeau (Justin's father) took office (April 20, 1968) was $14B. When he left office (June 30, 1984,) it had reached $130B. That’s a factor of nine within sixteen years. At that rate, the debt would have been over $11T by 2016. <sarc>Thankfully, it’s only $613B now.</sarc>"33 years later, and still no revolution. Are we too polite, or do we need new gun laws... or both?

In reply to by Pollygotacracker

Silver Savior Jun 8, 2017 1:11 PM Permalink

I don't get it. What household assets are valuable? I heard around 1% hold precious metals so what is of value other than precious metals? Everything else are depreciating liabilities.Ha ha ha. Fake wealth. Good luck liquidating all that crap to the low bidder. Looks pretty on paper I guess. Too bad ya can't do anything productive with it.

Endgame Napoleon Silver Savior Jun 8, 2017 4:26 PM Permalink

I think the smartest people are the ones who either buy low-maintenance land close to a developed area or a small, modest house in a very nice area. I have seen people do that, with others scoffing at them during this McMansion period. One of these people decorated and renovated her house better than any of them. It is stunning, although it's just a small house in a really fine area. People who pay houses like that off probably have good assets, right? I would think so, not that I would really know. It seems like that would always be a little more valuable, no matter what happens to the rest of the market, just by virtue of the area. But these people did not pay too much for the house, itself, as it was not a trendy style at the time. All of you Z-Hedgers talk about the math, but not the irrational things that motivate buyers, like style. Women and even some men are VERY motivated by such things in more cases than you think. A lot of these metrosexual men are quite motivated by style, whether gay or straight.

In reply to by Silver Savior

any_mouse order66 Jun 8, 2017 1:26 PM Permalink

Serfs Down. Always and Forever.

I was going to post "Up", but somebody gets up earlier than I do. I already had in mind "Down" as an alternative.

I thought the numbers, trillions, were made up and this was about some future dystopia.

Oh wait, the economy is make believe.

In reply to by order66