Housing Matters Little to U.S. Consumers' Wealth: Chart of the Day

“The relative importance of housing to the consumer has been highly exaggerated,” according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

Levkovich drew the conclusion by tracking the equity in single-family homes and other owner-occupied real estate as a percentage of U.S. household net worth, using data compiled by the Federal Reserve.

As the CHART OF THE DAY illustrates, home equity accounted for 16.2 percent of net worth at the end of the second quarter, the Fed’s data showed. The first quarter’s figure, 15.4 percent, was the lowest in more than half a century.

Housing no longer has the effect on consumer confidence that it did when home prices were surging in the past decade, Levkovich wrote in an Oct. 29 report that included a similar chart. Equity in owner-occupied real estate peaked in the fourth quarter of 2005 at 25.5 percent of net worth.

“While the housing market’s ascent initially drove feelings of wealth during the mid-2000s, that relationship basically has broken down,” he wrote. “Employment trends and stock-market wealth seems to have much more impact.”

Higher share prices may make consumers feel good enough to spend more during this year’s holiday shopping season, Levkovich wrote. Through October, the Standard & Poor’s 500 Index advanced 6.1 percent for the year.

(To save a copy of the chart, click here.)

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

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