Household Net Worth Growth Slows in Q2

Household Net Worth Growth Slows in Q2

09/25/2013 BY: MARK LIEBERMAN, FIVE STAR INSTITUTE ECONOMIST

Household net worth improved $1.3 trillion in the second quarter — half as fast as the first quarter — as real estate values grew $626.7 billion, the Federal Reserve reported Wednesday in its quarterly Flow of Funds report.

But, with a drop in mortgage debt — including home equity loans and lines of credit –- from $9.39 trillion in the first quarter to $9.34 trillion in the second, homeowner equity grew to 49.8 percent in the second quarter from 48.1 percent in the first.

Household investment in the stock market grew $265 billion in the second quarter compared with $929 billion in the first when overall net worth grew $2.8 trillion.

Owners’ equity as a percentage of real estate value has been on a steady upward trajectory since dropping to 36.3 percent in the first quarter of 2009. It rose to 45.4 percent at the end of 2012 and to 48.1 percent one quarter later. The 2.7 percentage point increase in the first quarter of this year is the fastest quarter-to-quarter growth this century. Even with the increase, though, the equity percentage remains sharply lower than 57.7 percent in 2000.

After falling $223 billion in the first quarter, disposable personal income grew $98.6 billion in the second. The first quarter drop reflected the rollback of the cut in payroll taxes which ended January 1. With the increase, second quarter disposable personal income — essentially after-tax income — was $12.39 trillion, about $130 billion less than the record $12.52 trillion in the fourth quarter last year.

Consumer borrowing – non-real estate debt – grew $41.7 billion in the second quarter after increasing just $104 million (cq) in the first. Residential mortgage debt fell $41.8 billion in the second quarter after dropping $49.7 billion in the first. Residential mortgage debt has dropped for 21 consecutive quarters from a peak of $10.67 trillion in the first quarter of 2008.

All in, household assets grew $1.3 trillion in the second quarter – compared with $2.8 trillion in the first – to $88.4 trillion.

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