Household wealth in the U.S. increased from April through June, supported by gains in the stock and housing markets that are improving Americans’ finances.
Net worth for households and non-profit groups climbed by $1.34 trillion in the second quarter, or 1.8 percent from the previous three months, to $74.8 trillion, the Federal Reserve said today from Washington in its financial accounts report, previously known as the flow of funds survey.
Climbing stock prices and rising home values have helped ease the sting of higher payroll taxes and across-the-board federal spending cuts this year. Further employment and wage gains, combined with cheaper borrowing costs made possible by the Fed’s record monetary stimulus, may provide more room for improvement in household balance sheets and consumer spending, which makes up 70 percent of the economy.
“This is a really important source of healing,” said Julia Coronado, chief economist for North America at BNP Paribas SA in New York. “The turnaround in the housing market has been pretty important for consumer balance sheets and the ongoing performance of the equity markets has been behind it as well.”
Household net worth is $6.7 trillion above its pre-recession peak of $68.1 trillion reached in the third quarter of 2007. It was $73.5 trillion in the first three months of 2013.
The value of financial assets, including stocks and pension fund holdings, held by American households increased by $674 billion in the second quarter, according to today’s Fed report.
The Standard & Poor’s 500 Index climbed 2.4 percent from March 29 through June 28, following a 10 percent increase in the first quarter.
An improved housing market has also helped support gains in household worth. The S&P/Case-Shiller index of property values in 20 cities rose 12.4 percent in July from the same month in 2012, the most in more than seven years, the group said yesterday in New York.
Household real-estate assets climbed by $602.3 billion, the data show. Owners’ equity as a share of total household real-estate holdings increased to 49.8 percent last quarter from 48.1 percent.
The Fed is trying to help preserve gains in household net worth by maintaining a low interest-rate environment and continuing stimulus efforts. Labor market conditions are “still far from what all of us would like to see,” Chairman Ben S. Bernanke said Sept. 18 after a two-day meeting of the Federal Open Market Committee, when it unexpectedly refrained from reducing its $85 billion pace of monthly bond buying.
“The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth,” Bernanke said at the time.
Automakers have also benefited as easy lending conditions lure buyers to showrooms. The annualized pace of motor vehicle sales in August exceeded 16 million for the first time in six years, and deliveries of new cars and light trucks may reach 16.1 million in 2014, according to the average estimate of 13 analysts in a survey by Bloomberg News.
Household debt climbed at a 0.2 percent annual rate last quarter, today’s report showed. Mortgage borrowing decreased at a 1.7 percent pace. Other forms of consumer credit, including auto and student loans, increased at a 5.6 percent pace.
Total non-financial debt rose at a 3.1 percent annual pace last quarter, led by a 6.9 percent increase in business borrowing followed by a 2.5 percent gain in federal debt. State and local government borrowing climbed at a 1.1 percent pace.