Healthy stock and housing markets continue to bolster household wealth for Americans, reaching a new high in the last quarter of 2014 to $83 trillion, the Federal Reserve reported this week.
Stock and mutual fund portfolios jumped $742 billion. The value of Americans’ homes increased $356 billion. Combined, they represent a 1.9 percent rise during the October-December quarter, eCredit reported.
However, most American households are behind where they were in 2007, a year before the peak of the financial crisis and Great Recession.
There is another downside to these figures. Most of the wealth is still concentrated among the richer households. The wealthiest 10 percent of US households own about 80 percent of stocks.
The wealth gap has become a bigger issue as the US economic recovery comes much slower for many families still struggling to accumulate substantial savings — either for retirement or emergencies.
Researchers at the University of Michigan last year reported that the median wealth of a US household, in inflation-adjusted dollars, dropped 36 percent from 2003 to 2013. In that same period, the richest 5 percent of households saw their median net worth increase by 12 percent.
The median household in the top 5 percent carries a small percent of its wealth in home equity. Much more of their assets are in businesses (49 percent) and financial investments such as stocks and bonds (25 percent). This indicates that the richest households with the ability to diversify have gained much more from the equity bull market of the past six years.
Nonetheless, more equity and home wealth can boost spending and economic growth. Higher stock and home values give Americans a feeling of being financially secure again, and that bodes well for consumer spending which fuels about 70 percent of the economy.
