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Family Wealth Changes Little

From Bloomberg News

Growth in U.S. family wealth slowed to a crawl from 2001 to 2004 and stock ownership fell as the economy emerged from the first recession in a decade, a Federal Reserve report indicated Thursday.

Median net worth, the difference between household assets and liabilities, rose 1.5% to $93,100 during the survey period, down from a 10.3% gain from 1998 to 2001, according to the report. Net worth fell for the bottom 40% of families.

“What we see is little change in the assets of the typical American household between 2001 and 2004, after substantial increases in the previous six years,” said Stephen Brobeck of the Consumer Federation of America in Washington.

The survey of 4,000 households, which the Fed conducts every three years, reflected a post-recession economy that grew slowly, then gathered pace. Economic growth accelerated from 1.6% in 2002 to 4.2% in 2004, and a loss of 535,000 jobs in 2002 turned into a gain of more than 2 million positions in 2004.

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The median net worth of the wealthiest 10% of families rose 4% to $924,100 in 2004 from $887,900 three years earlier, the report indicated. Net worth for the poorest 20% of families fell 11% to $7,500.

“The measured gains in wealth in the 2001-04 period pale in comparison with the much larger increase of the preceding three years,” the report said.

The share of families that held stocks either directly or through a retirement plan fell to 49% in 2004 from a high of 52% three years earlier, the report indicated. The Standard & Poor’s 500 index, which serves as a benchmark for many mutual funds, fell for three straight years from 2000 to 2002. The decline wiped out about $8 trillion in market value from March 2000 to March 2003. The index rebounded from 2003 to 2005, although it remains about 15% below its 2000 record.

The index of stocks rose 5.6% during the survey period.

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Homeownership was an important factor in changes in net worth. The average home value rose 28.1% from 2001 to 2004, producing a dollar gain of $54,200. The portion of families that own a home rose to 69.1% in 2004, from 67.7% in 2001.

Homeowners saw their net worth rise about 1%, whereas the net worth of renters fell 22%.

“The strong appreciation of house values and a rise in the rate of homeownership produced a substantial gain in the value of holdings of residential real estate,” the Fed said.

That wasn’t enough to make families much wealthier.

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“Net wealth hardly grew despite a substantial rise in house values,” Brobeck said.

Homeowners had a median net worth of $184,400 in 2001 compared with $4,000 for those who didn’t own homes.

Growth in income slowed along with net worth. Median income rose 1.6% to $43,200 from 2001 to 2004, down from a 9.5% gain from 1998 to 2001.


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