Strong Household Net Worth Gains, Led By Houses and Financial Assets

Money, US, $100 bills
Money, US, $100 bills

A report from the Federal Reserve is signaling that US households have seen a substantial rise in their net worth. With the recession not being too long ago and with many workers still unemployed, this is great news when the news flow is still mixed to cautious on so many fronts.

Today's report of the Flow of Funds Summary Statistics for the fourth quarter of 2012 shows that household net worth was up more than $1.1 trillion from the prior quarter to about $66.0 trillion at the end of the fourth quarter of 2012. It also shows that the value of corporate equities and mutual funds owned by households expanded by $130 billion and the value of real estate owned rose by $480 billion in the quarter.

This matters because the report on net worth is the difference between the value of households' assets and liabilities. There are still some debt areas growing in the report. Debt of the domestic nonfinancial sectors expanded at a seasonally adjusted annual rate of 6.5% in the fourth quarter, which is 4 percentage points higher than the third quarter. Household debt rose by an annual rate of 2.5% in the fourth quarter and that is actually a contraction of 0.75%. Consumer credit rose at an annual rate of 6.5% percent.

U.S. companies are also sitting on a virtual mountain of cash. That is partly tied to corporate bonds but that figure rose to $1.79 trillion from $1.77 trillion the prior quarter.

There is a huge difference of what is happening at the federal level versus the state and local levels. State and local government debt had been flat in the third quarter but it fell by 3.75%. Washington continues in its irresponsibility trend as the federal government debt rose at an annual rate of 11.25% in the quarter. It is very hard to consider that this is good news on the Federal side, but it is the lowest growth of federal debt with a formal 10.9% growth for all of 2012, down from 11.4% debt growth in 2011, 20.2% growth in 2010, 22.7% in 2009, and 24.2% in 2008.

The total assets were not seasonally adjusted, but this grew from $78.2187 trillion in the third quarter to $79.5248 trillion in the fourth quarter. Real estate values rose from $19.4357 trillion to $19.9144 trillion. Financial assets rose from $53.6061 trillion to $54.3905 trillion.

The real household net worth figures rose from $64.8981 trillion in the third quarter up to $66.0717 trillion in the fourth quarter.


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