Bloomberg News

Household Wealth in U.S. Falls for Second Consecutive Quarter

December 09, 2011

Dec. 8 (Bloomberg) -- Household wealth in the U.S. fell from July through September for a second straight quarter as the European debt crisis depressed stocks and home values decreased.

Net worth for households and non-profit groups decreased by $2.45 trillion to $57.4 trillion, the Federal Reserve said today in its flow of funds report from Washington. Americans reduced debt in the third quarter, extending a string of declines dating back three years.

A 14 percent slump in the Standard & Poor’s 500 Index, the worst quarter since 2008, combined with another decrease in households’ real estate values in the third quarter. A rebound in stocks at the end of this year and slower home-price declines may help stabilize Americans’ balance sheets at the same time employment growth picks up.

“We’re kind of in the third inning of the consumer deleveraging at this point,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report. “Job growth suggests that we’ll see some pace of increases in consumer income.”

The value of household real estate decreased by $98.3 billion in the third quarter after dropping by $37 billion in the previous three months.

Owners’ equity as a share of total household real-estate holdings was little changed at 38.7 percent last quarter, today’s report showed.

The volume of outstanding home mortgages was $9.93 trillion at the end of the second quarter, the lowest since the end of 2006, according to separate Federal Reserve data. That means U.S. mortgage debt, a driver of consumer spending during the real estate boom, may be about to enter its fourth year of decline as foreclosures wipe out home loans and housing purchases fall.

--Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus