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Household Wealth Shrinks for Second Quarter in Row

Reuters
Thursday, 5 Jun 2008 | 3:18 PM ET

The net wealth of U.S. households fell 2.9 percent in first three months of 2008 as home values eroded further and share holdings fell sharply, marking the second quarterly drop in a row, the Federal Reserve said Thursday.

AP

The U.S. central bank's "flow of funds" quarterly report showed the net worth of American households dipped to $55.97 trillion in the first quarter, from a downwardly revised $57.67 trillion in the final three months of 2007.

Net wealth in the third quarter of 2007 was $58.20 trillion.

The consecutive quarterly declines were the first since the second and third quarters of 2002, when recession-battered U.S. households saw their net worth fall 3.3 percent and 4.4 percent, respectively, according to Fed data.

Total U.S. debt, excluding the financial sector, rose at an adjusted 6.5 percent annual rate in the first quarter, compared to a revised 7.5 percent annual increase in the fourth quarter of 2007.

Household debt accumulation slowed to a 3.5 percent annual pace in the first quarter of 2008 from a 6.1 percent fourth-quarter rate. But the federal government's debt growth accelerated, to a 9.5 percent annual rate from a 5.1 percent growth rate in the fourth quarter.

The decline in household net worth was evident in both home values and in financial assets hit by markets turmoil during a period that saw the collapse of Wall Street investment bank Bear Stearns and massive Fed liquidity injections.

The value of real estate holdings fell 1.3 percent to $22.07 trillion in the first quarter, while the value of stock holdings fell 10.2 percent to $4.90 trillion and mutual fund shares fell 7.8 percent to $4.74 trillion.

Total household financial assets fell 2.9 percent to $44.07 trillion, the Fed report showed.

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