Many Americans learned this weekend that they’ve gotten poorer. “The Typical Household, Now Worth a Third Less,” proclaimed the New York Times, citing a new study sponsored by the Russell Sage Foundation (PDF). Median wealth declined more than 35 percent from 2001 to 2013, the study found, while wealth at the 95th percentile grew 14 percent. We can argue about whether America is entering its next Gilded Age, but these trends are important for another reason: They reveal how vulnerable the average American has become to the swings of one market in particular—housing.
Starting around 2001, American families put an increasing amount of their wealth in housing and took on more debt. This came at the expense of other kinds of investments, such as nonhousing wealth, which hasn’t returned to its 2001 peak. The figure below, from the Fed’s Survey of Consumer Finances, plots the median value of different kinds of assets owned by U.S. households: