Wealth of U.S. Households Grows, but So Does Their Debt

The net wealth of American households rose in the third quarter of 2005 as real estate and financial assets gained value, but household debt grew at the fastest rate since 1987, the Federal Reserve said Thursday.

In its quarterly Flow of Funds report, the central bank said household balance-sheet values rose to $51.09 trillion in the quarter, up from a revised $49.77 trillion in the second quarter.

The second-quarter net worth was originally reported at $49.83 trillion. The data are not seasonally adjusted.

Household real estate assets grew by $615 billion in the third quarter, and financial assets rose by $959.3 billion.

At the same time, household liabilities rose $338 billion, with mortgage debt climbing $289.5 billion to $8.2 trillion.

The Fed said borrowing outside the financial sector rose at an annual rate of 9.1% in the third quarter.

Borrowing outside the federal government and excluding the financial sector rose at a 10% annual rate, the steepest rise since the first quarter of 1999, as household and state and local government borrowing grew.

Household debt grew at an annual rate of 11.6%, the steepest climb since the second quarter of 1987, the Fed said.

Growth in business borrowing slowed to a 7.4% annual rate from 9.1% in the preceding quarter.