U.S. families’ wealth dives 39 percent in 3 years – Wealthiest gain 2 percent – ‘We were in free fall’
By Tim Mullaney, USA TODAY
12 June 2012 The median U.S. household lost nearly 39% of its wealth from 2007 to 2010, the Federal Reserve said Monday, emphasizing anew the impact of the financial crisis and the recession on ordinary Americans. [“Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances”, Bricker, et al., 2012 [pdf].] Middle-class families took the biggest hit to their net worth during the crunch because much of their wealth was in their homes, whose values plunged during the recession and in its aftermath, the Fed report said. Wealthier families saw a smaller drop in their incomes, but nowhere near as much impact on their net worth. Median incomes among the richest 10% of Americans fell 5.3%, compared with 7.7% for all Americans. The median net worth of the wealthiest 10% actually rose. The median is the point where half are above and half below. Overall, median household net worth slid to 1992 levels after adjusting for inflation, wiping out the gains of the late-1990s Internet boom and the post-2000 housing surge, the Fed said. […] The median family’s net worth dropped to $77,300 from $126,400 in 2007, the Fed said. The wealthiest 10% of families saw their median net worth rise 1.9% to $1.17 million. Household net worth peaked at $66 trillion before the recession hit in December 2007 and fell to $54 trillion in 2008, according to the Fed. It was $63 trillion in the first quarter this year, but that doesn’t reflect the stock market’s fall since. The Fed estimates Americans lost $7 trillion in home equity due to a housing bust that followed a surge in mortgage defaults after 2006. […] Incomes improved in late 2011 but have begun sliding again this year, said Gordon Green, co-founder of Sentier. The decline is larger and more persistent than in the recovery from the recession after 2000, when family incomes were restored within 18 months, Green said. “Incomes went down more during two years of this recovery than during the recession itself,” he said. “I don’t think we’ve seen anything like this.”
WASHINGTON, 11 June 2012 (Washington Post) – The recent recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline. The Federal Reserve said the median net worth of families plunged 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on a par with where they were back in 1992. The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross. Those findings underscore both the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And, so far, the country has seen only a halting recovery. “It’s hard to overstate how serious the collapse in the economy was,” said Mark Zandi, chief economist for Moody’s Analytics. “We were in free fall.” […] Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the “reverse-wealth effect.” As consumers watched the value of their homes rise during the boom, they felt more confident spending money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper. […]
