Thursday, March 7, 2013

Household net worth recovering nicely

According to the Federal Reserve's calculation of households' balance sheet, household net worth at the end of last year recovered to its highest level since the onset of the 2008-2009 recession. Net worth is still about 8.5% below its pre-recession highs after adjusting for inflation, however, but at this rate (net worth rose 9% last year) we could see a new high in net worth in both nominal and real terms by the end of this year. Equities are already up over 8% year to date.


The recovery since late 2007 has been healthy in every respect: equity valuations are up, savings are up, real estate values are up, and liabilities are down. Households have deleveraged and built up their savings, and the recovering economy has boosted equities and, more recently, housing prices.


According to Radar Logic, housing prices rose over 13% last year.

The recovery may have been slow and agonizing for many, but it is for real. The U.S. economy has gone through tremendous adjustments that have enabled it to resume a normal and healthy path of growth.
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6 comments:

  1. sgt.red.blue.redMarch 7, 2013 at 12:48 PM

    Yep. New High. But not so sure about 'real', though. Nominal, yes. But am not complaining. 92 percent long, and have been so since before the big 2009 bottom. Rode down, and stayed away from 2nd story windows.

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  2. GloeschiMarch 7, 2013 at 1:42 PM

    I think there is a little typo: "The recovering economy has boosted equities". Mr. Bernanke just phoned in and said it should read "The Fed has boosted equities". He also said you forgot to account for the fact that Federal government debt went from $8.6 trillion at the end of 2006 to 16 trillion. Other than that, your analysis is really spot-on!

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  3. marmicoMarch 7, 2013 at 5:54 PM

    Real per capita household net worth is down 2.3% since the 2000Q1 peak and 19.3% since the 2007Q1 peak.

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  4. Benjamin ColeMarch 7, 2013 at 7:44 PM

    It ain't pretty, but we are marching up the field, four-yard gains, and mediocre ground game.

    Sgt Red: I didn't even go to the upper floors....

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  5. CabodogMarch 7, 2013 at 8:32 PM

    Scott, interested in hearing your current thoughts about AAPL. Thanks...

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  6. sgt.red.blue.redMarch 8, 2013 at 12:19 PM

    Benjamin, lots of room for this market to move to the upside, and it will occur over several years. Last time the market didnt falter until one year after the Fed STOPPED raising rates.

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