Family Net Worth Drops to Level of Early ’90s, Fed Says

If American families caught in the middle of the real estate bubble and subsequent recession didn't already know that they were falling behind the Fed issued disturbing data in it's Survey of Consumer Finances.  This report, issued every three years, is one of the broadest and deepest sources of information about the financial health of American families.


Full story here via the NYT

• A hypothetical family richer than half the nation’s families and poorer than the other half had a net worth of $77,300 in 2010, compared with $126,400 in 2007, the Fed said. The crash of housing prices directly accounted for three-quarters of the loss.
• Families’ income also continued to decline, a trend that predated the crisis but accelerated over the same period. Median family income fell to $45,800 in 2010 from $49,600 in 2007. All figures were adjusted for inflation.
• The share of families saving anything over the previous year fell to 52 percent in 2010 from 56.4 percent in 2007. Other government statistics show that total savings have increased since 2007, suggesting that a smaller group of families is saving more money, while a growing number manage to save nothing.
• The survey also found a shift in the reasons that families set aside money, underscoring the lack of confidence that is weighing on the economy. More families said they were saving money as a precautionary measure, to make sure they had enough liquidity to meet short-term needs. Fewer said they were saving for retirement, or for education, or for a down payment on a home.
• The report underscored the limited progress that households had made in reducing the amounts that they owed to lenders. The share of households reporting any debt declined by 2.1 percentage points over the last three years, but 74.9 percent of households still owed something, and the median amount did not change.
• The survey also confirmed that Americans are shifting the kinds of debts they carry. The share of families with credit card debt declined by 6.7 percentage points to 39.4 percent, and the median balance fell 16.1 percent to $2,600.
• Families also reduced the number of credit cards that they carried, and 32 percent of families said they had no cards, up from 27 percent in 2007.
• Conversely, the share of families with education-related debt rose to 19.2 percent in 2010 from 15.2 percent in 2007. The Fed noted that education loans made up a larger share of the average family’s obligations than loans to buy automobiles for the first time in the history of the survey.
• Families with incomes in the middle 60 percent of the population lost a larger share of their wealth over the three-year period than the wealthiest and poorest families.
• One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.
• Those middle-income families also lost a larger share of their income. The earnings of the median family in the bottom 20 percent of the income distribution actually increased from 2007 to 2010, in part because of the expansion of government aid programs during the recession. Wealthier families, which derive more income from investments, were also cushioned against the recession.
• Ranking American families by income, the top 10 percent of households still earned an average of $349,000 in 2010.