Americans’ Household Wealth Falls by Record $6.1 Trillion

A shopper is seen past a sign displaying the price per pound of russet potatoes at a supermarket in Montebello, Calif., on Aug. 23, 2022. (Frederic J. Brown/AFP via Getty Images)

The net worth of American households dropped by $6.1 trillion in the second quarter of 2022, triggered by a decline in the stock market, according to a latest report by the Federal Reserve.

Total net worth of households and nonprofit organizations at the end of the second quarter was at $143.8 trillion, according to the Financial Accounts of the United States report. This is the second straight quarterly decline, having earlier fallen to $149.9 t trillion in first quarter 2022, from $150.01 trillion during the last quarter of 2021. In the household balance sheet, the value of stock holdings declined by $7.7 trillion, while real estate value jumped by $1.46 trillion.

The $7.7 trillion fall in stock holdings followed a $2.95 trillion decline in the first quarter and reflected the overall bearish trend of the markets in 2022. The S&P 500 Index is trading lower by more than 15 percent year to date, as of Sept. 9.

The $1.46 trillion jump in real estate holdings is the fourth straight quarterly increase. The value of real estate holdings had registered positive growth in both 2020 and 2021.

“Directly and indirectly held corporate equities ($38.6 trillion) and household real estate ($41.2 trillion) were among the largest components of household net worth. Household debt (seasonally adjusted) was $18.6 trillion,” the report said.

A report by the Federal Reserve Bank of New York released in early August had shown that credit card debt of American households grew in second quarter 2022. Total household debt was pegged at $16.15 trillion, with credit card balances rising by $46 billion in the three-month period.

“The 13 percent cumulative increase in credit card balances since second quarter 2021 represents the largest in more than 20 years,” the report stated.

Lower Savings

The fall in household net worth is happening as many Americans struggle to save enough money amid elevated inflation. Annual inflation has been above 7.5 percent every single month this year.

A July report by Morning Consult had shown that the share of adults with money leftover after paying for monthly expenses fell across all income categories.

Among households making below $50,000 per year, less than 40 percent had money at the end of the month after meeting expenses.

For those earning between $50,000 and $99,999, this number was at 60, down from almost 70 in July 2021. For households making over $100,000 annually, 80 percent had money after paying for expenses, down by 5 percent compared to a year back.

In a Sept. 9 post published by banking and financial services group ING, James Knightley, ING’s chief international economist, points out that household assets are at 880 percent as a proportion of disposable income, while liabilities are only at 102 percent.

This is a “much better position” when compared to previous recessionary environments, which indicates that the consumer sector might be able to withstand economic challenges. ING is expecting a recession in 2023, but only a modest and short-lived one— provided the Fed eases its monetary policy swiftly.