Saturday, September 19, 2009

Households' Net Worth Rises for First Time in Two Years

The Federal Reserve released some surprising, but good news this morning: US Households net worth’s have risen for the first time in 2 years. has posted an interesting article explaining how consumers in the US are paying down debts at record pace. Check out a snippet of their article below, or find the original post here.

American households were $2 trillion richer on June 30 than they were three months earlier, the first time in two years that household net worth has increased, the Federal Reserve reported Thursday in its quarterly flow of funds report.

Household wealth rose in the second quarter at a 17% annual rate, or $2 trillion, to $53.1 trillion after falling at a 13% rate in the first quarter, the Fed said. It was the first time since the second quarter of 2007 that wealth had increased. Read the full report.

Net worth is defined as assets minus liabilities. Assets rose by $2 trillion to $67.2 trillion. Liabilities fell by $34 billion to $14.1 trillion.

The rally on Wall Street was the main reason for the increase in household wealth, but rising home prices contributed as well. Wealth in corporate equities rose by $1.04 trillion, while real estate wealth rose by $139 billion. Assets held in mutual funds, life insurance and pension funds rose by $1.06 trillion.

Households had lost real-estate wealth for nine consecutive quarters before the second quarter's gain.

Consumers continued to pay down debts or have their debts written off at a record pace. In the second quarter, household debt fell at a 1.7% annual rate to $13.7 trillion, matching the record percentage decline in the fourth quarter. Household debt has fallen four quarters in a row and is down 5% from the peak. Before this recession, household debt had never declined in any quarter dating back to 1952.

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