Household wealth in U.S. rises by $1.17 trillion

HOUSEHOLD WEALTH rose by $1.17 trillion during the fourth quarter, propelled by a gain in home prices.
Posted 3/7/13

WASHINGTON – Household wealth in the U.S. climbed in the fourth quarter, propelled by a gain in home prices that is helping repair family finances.

Net worth for households and non-profit groups increased by $1.17 trillion from October through December, or 1.8 percent from the previous three months, to $66.1 trillion, the Federal Reserve said today from Washington in its flow of funds report.

Household wealth is approaching its pre-recession level as the recovery in home values helps Americans overcome higher taxes Congress put in place this year. Federal Reserve policy makers’ plans to keep lending rates low may continue to shore up finances, giving consumers the confidence to keep buying big- ticket items including cars and homes.

“Growing wealth makes people more apt to spend,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “Part of the Fed’s grand plan is hoping that the wealth effect helps growth.”

Household net worth is still $1.34 trillion below its pre- recession peak of $67.4 trillion reached in the third quarter of 2007.

The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $784.4 billion in the fourth quarter, today’s Fed report showed.

Equity gains

The gain this quarter may be even bigger as investors have taken tax increases and federal government budget cuts in stride. On March 6, the Dow Jones Industrial Average closed at a record, and the value of U.S. equities has now increased by $1.44 trillion since the end of 2012.

The Dow rose 0.3 percent today to 14,336.12 at 12:18 p.m. in New York as data showed the job market was improving.

The number of claims for jobless benefits unexpectedly fell by 7,000 to 340,000 in the week ended March 2, the lowest since mid January, according to figures from the Labor Department. The median forecast of 50 economists surveyed by Bloomberg called for an increase to 355,000. The four-week average dropped to a five-year low.

Household real-estate assets climbed by $417.5 billion, according to today’s flow of funds data. Owners’ equity as a share of total household real-estate holdings increased to 46.6 percent last quarter from 45.2 percent in the previous three months.

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