U.S. Household Wealth Rose by $1.64 Trillion in Fourth Quarter

Americans’ wealth rebounded in the fourth quarter, as stock prices recovered from an earlier slump and home values continued to improve.

Net worth for households and non-profit groups rose by $1.64 trillion in the fourth quarter, or 1.9 percent from the previous three months, to $86.8 trillion, the Federal Reserve said Thursday from Washington in its financial accounts report, previously known as the flow of funds survey. Household wealth fell 1.5 percent in the third quarter.

Higher home prices and a recovery in equity prices helped pad many Americans’ balance sheets last quarter, putting consumers on better footing to spend in 2016. More recently, continued job growth and low fuel prices are also helping to improve conditions for lower-income Americans, for whom financial and real-estate assets play a smaller role.

“Households’ personal financial situations are holding firm, at least at the moment, and it’s giving them the confidence to spend,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “We’ve seen stock markets pick up, which helps out on the wealth effect there, gasoline prices are still low and the labor situation is still progressing forward.”

The value of financial assets, including stocks and pension fund holdings, held by American households increased by $1.25 trillion in the fourth quarter, according to the Fed report. The Standard and Poor’s 500 Index climbed 6.5 percent from Sept. 30 to Dec. 31. The index is down 2.7 percent in the first quarter through Wednesday.

Real Estate

Household real-estate assets climbed by $417.6 billion in the final three months of 2015. Owner’s equity as a share of total household real-estate holdings increased to 56.9 percent in the fourth quarter from 56.3 percent in the previous period.

Household debt increased at a 3.4 percent annualized rate in the fourth quarter. Mortgage borrowing advanced at a 1.5 percent pace after rising 1.7 percent in the third quarter. Consumer credit, including auto and student loans, climbed at a 5.9 percent rate from 7.2 percent.

Total non-financial debt grew at an 8.6 percent annual pace last quarter. Federal government obligations climbed by 18.5 percent, while business borrowing increased 5 percent. State and local government debt was little changed.

Before it's here, it's on the Bloomberg Terminal.