Household balance sheets continue to improve

Household balance sheets continue to improve, according to the Q1/11 figures just released by the Fed. Net worth has yet to recover to its former highs, but financial asset holdings are recording strong gains, thanks to increased savings and rising equity and corporate bond prices. Thanks also are due to deleveraging: households have paid down about $0.5 trillion in debt over the past four years, though defaulted mortgages likely figure prominently in that total. Real estate remains depressed, but the rate of decline of housing values has clearly fallen over the past year or so. Recovery, repricing, and deleveraging are all proceeding at a moderate pace, and there is probably another year or two to go before we get back to the peak net worth of 2007, but the progress is nevertheless salutary.