Fed Survey: Crisis Set Back Family Net Worth Nearly 20 Yrs

Author: Market News International | Category: News

Author: Market News International

–Median Net Worth Between 2007 and 2010 Knocked Back to 1992 Level

By Denny Gulino

WASHINGTON (MNI) – If more evidence was needed of the devastating
effect of the financial crisis, the Federal Reserve provided it Monday,
showing median net worth by 2010 had regressed to a level last seen in
1992.

The Fed’s Survey of Consumer Finances, published in the June
edition of the Federal Reserve Bulletin, showed the equity families held
in their property declined from a median of $95,300 to $55,000 between
2007 and 2010, a drop of 42.3%.

It was a period of “really extraordinary economic activity,” a Fed
economist said on a conference call with reporters. The family finance
survey’s findings were somewhat different than surveys of households
conducted by the Census Bureau.

Average American family income dropped 11.1%, to $78,500. The
median income fell 38.8%.

The measure of median net worth, which had been up to $126,400
before the crisis, is heavily driven by house prices. Its 38.8% decline
to $77,300 tracked the decline in the value of house prices which has
still not recovered in most areas of the country.

“The survey has been done in a methodologically consistent way
since 1989 and we certainly don’t see anything like this drop in prior
time periods including other surveys that spanned recessions,” a Fed
economist said.

Yet as interest rates plunged, helping offset some of the financial
stress. “The fraction of families with debt payments that were greater
than 40% of their family income, which we take as an indicator of
extreme financial stress, remain nearly constant.”

Census data misses the very wealthiest, a Fed economist said, and
so the Fed survey numbers which include wealthy family figures tend to
be higher. The Fed survey also counts even one-person households as
families.

The 2007 to 2010 period showed the “most substantial downturn since
the Great Depression,” the report said.

“Some families saw losses on the value of their assets sufficient
to eliminate any prior gains,” the report said. So among all families in
2010, 15.1% reported a net loss on their house or other real estate,
meaning the value they reported for the property in 2010 was below what
they reported having paid for it, the report said.

** MNI Washington Bureau: 202-371-2121 **

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