What Makes Up Our Wealth

Jan 28, 2013 | by Franck Cushner, CFP®

 

Every quarter the Federal Reserve releases a report measuring the net worth of households. The report includes a “balance sheet” of assets such as real estate, financial assets, bank accounts, as well as outstanding debt.

 

In its most recent report, for the third quarter 2012, the net worth of U.S. households rose to $64.77 trillion, its highest level since household wealth last peaked in the third quarter of 2007, at $67.3 trillion.

 

Some economists that follow consumer behavior, believe that increases in wealth could make consumers feel more comfortable spending their money, thus contributing to economic growth.

 

While total debt as a share of income remains historically high, one measure kept by the Fed has shown that monthly debt payments as a share of income in the second quarter were at the lowest since 1993.

 

Rising home prices helped drive the increase in the latest quarter. The Federal Reserve identified that the value of real estate owned by households rose about $300 billion, and with stock holdings increasing by about $520 billion.

Real estate makes up the single largest component of household wealth, representing 30%. Corporate equities (individual stocks), make up 15% of net worth. The components making up household wealth fluctuate in value and are affected by different factors, including monetary and fiscal policy. All in all, a rise in the overall value of these assets is of benefit to economic well being.

Source:           Federal Reserve

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