Stocks, Real Estate Drive US Household Wealth to Record High

Thanks in part to surging stocks and increasing property values, the wealth of people living in the U.S. increased in the fourth quarter of 2017.

According to a report in The Wall Street Journal citing Federal Reserve data, household net worth rose more than $2 trillion in the fourth quarter to a total of $98.746 trillion, which is a record.  What’s more, households in the U.S. saw their net worth increase to close to seven times their disposable personal income last year. At the same time, the rate of savings among Americans declined in 2017 to 3.74% from 5.98% in 2016. In 2015 the savings rate stood at 7.19%.

The Wall Street Journal noted that past recessions were preceded by times when asset values were rising but saving was at low rates. This time, however, the gap between savings and household wealth is wider. The paper pointed to the first quarter of 2000, the year before the economy slid into a recession because of the bursting of the dotcom bubble. At that time, wealth was more than six times disposable income. Meanwhile, wealth hit 651.8% of disposable income in the first quarter of 2006, under two years before the recession of 2008. Things are a little different this time around given household debt isn’t at the level it was in the 2000s and stock valuations aren’t as high as during the 1990s stock surge.

This does underscore the role the stock market and real estate prices play in the wealth of American households. Stocks set new highs seemingly every month last year, and the value of real estate has jumped along with property values. Citing the Federal Housing Finance Agency’s house price index, the paper reported that U.S. home prices increased 1.6% in the last three months of 2017.  Separate data from the Fed highlighted the fact that the gap between the rich and others is widening. The share of the wealth held by the top 1 percent rose to 39% in 2016, up from 30% in 1989.