Household wealth in the U.S. climbed in the first quarter, helped by labor market improvement and gains in the stock and residential real estate markets that are giving balance sheets a lift.
Net worth for households and nonprofit groups increased by $1.49 trillion from January through March, or 1.9 percent from the previous three months, to $81.8 trillion, the Federal Reserve said Thursday from Washington in its flow of funds report.
Rising stock prices and home values helped Americans feel wealthier at the start of the year, even as unusually harsh weather battered consumer and business spending. Bigger gains in the labor market may help further boost balance sheets and spur the household purchases that make up about 70 percent of the economy.
“The deleveraging on the consumer front has largely run its course, and we’ve obviously been helped by the run-up in financial assets,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn. “Balance sheets have been improving pretty substantially over the last few years.”
Household net worth is $12.9 trillion above its pre-recession peak of $68.9 trillion reached in the second quarter of 2007.
The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $721 billion in the first quarter, Thursday’s Fed report showed.
Equity prices have risen at a faster pace so far this quarter than in the first three months, with the Standard & Poor’s 500 Index advancing 3 percent from March 31 through June 4, while the first quarter saw a 1.3 percent increase.
Household real-estate assets climbed by $758 billion, according to Thursday’s flow of funds data. Owners’ equity as a share of total household real-estate holdings increased to 53.6 percent last quarter from 51.6 percent in the previous three months.
A slowing in the housing market recovery has limited those gains. The S&P/Case-Shiller index of property values increased 12.4 percent in March from the same month last year, the smallest 12-month gain since July, after rising 12.9 percent in the year ended in February, a May 27 report from the group showed.