By Christopher S. Rugaber
AP Economics Writer
WASHINGTON (AP) - Americans' household wealth rose in the first three months of this year as home values increased, offsetting a drop in stock prices.
The Federal Reserve said last Thursday that U.S. household net worth increased 1 percent to $88.1 trillion in the first quarter. Americans' stock and mutual fund portfolios shrank $160 billion, while home values jumped $498 billion. Savings in certificates of deposit and other bank accounts also rose.
The rise in real estate values likely means the wealth increase was more widely shared than in many previous quarters, because home ownership is the primary source of middle-class wealth. Richer Americans rely more on financial assets.
Greater household wealth could boost consumer spending, which drives 70 percent of the U.S. economy. That would accelerate economic growth. Americans typically spend a bit more when they feel wealthier.
Household wealth, or net worth, reflects the value of homes, stocks and other assets minus mortgages, credit card debt and other borrowing. The Fed's figures aren't adjusted for population growth or inflation.
The data underscores one key aspect of the seven-year old recovery from the Great Recession: Americans' finances are in much better shape than they were before the downturn.
In 2007, with home prices soaring, Americans loaded up on mortgage and credit card debt. That left them badly exposed when the economy crashed and nearly nine million people lost jobs.
Before the recession, U.S. household debt peaked at about 135 percent of after-tax incomes. That ratio has fallen steadily since and dropped again in the first quarter, to 105.6 percent, down from 107.4 percent a year earlier.
Household wealth has recovered unevenly since the recession. Stock prices began rebounding in 2009 and have reached record highs, lifting the fortunes of the wealthiest one-tenth of Americans, who own 80 percent of shares.
Home prices, meanwhile, didn't start to recover until 2012 and remain below their boom-era levels in most of the country. That's left many middle-income families likely poorer than they were before the recession.
Published: Mon, Jun 13, 2016
