I posted an article about bailing out Main Street on Monday because I knew a new net worth report was just around the corner.
Updated once every three years, the new data from the 2010 report released in 2012 shows that American household net worth has plummeted since 2007. CNN says it better than I can:
The stunning drop in median net worth — from $126,400 in 2007 to $77,300 in 2010 — indicates that the recession wiped away 18 years of savings and investment by families.
Back to 1992
American median net worth fell back to a level not seen since 1992. The Federal Reserve stated in its report that the majority of the decline is due to housing. Housing prices peaked right around the 2007 measure, and have fallen further even from the 2010 recording.
Theoretically, houses should be more valuable today than they are right now. American housing is significantly undervalued on a historical price-to-rent basis. Low rates should boost demand, but it’s quite difficult to boost demand to a point equal to the pre-burst fallout. Without resurgence in negative amortization loans and super-relaxed lending standards, it simply will not happen.
We’re essentially experiencing a full-circle event with asset-liability mismatches, which was the focus of the middle class bailout post. Most Americans are holding assets worth less than the liabilities on their balance sheets. So if we even out the mismatch, as we did with institutions, then maybe we’ll see a real recovery.
Other Interesting Tidbits
I found these two charts to be very interesting. First, it’s interesting to see that fewer people are interested in saving for education or home ownership. Of course, it’s not particularly surprising, but it just confirms what someone would expect.
Then there is this, a chart of “asset allocation” by net worth. Look to the relationship between greater net worth and stock exposure. (Something about the rich getting richer goes here.)
If you’d like to read the full report (print it out and find the nearest hammock), you can find it here.
Just to get people riled up…