Net worth of U.S. households hits record high

The net worth of U.S. households climbed to a record high in the final quarter of last year, boosted mostly by gains on stocks, the Federal Reserve said Thursday.

Net worth -- the difference between households’ total assets, such as homes and bank accounts, and their total liabilities, such as mortgages and credit card debt, totaled $55.6 trillion as of Dec. 31. That marked a 2.5% rise from the third quarter, the previous high.

Household assets totaled $68.9 trillion, offset by liabilities of $13.3 trillion.

For all of last year, households’ net worth rose 7.4%, a slower pace than the 7.9% increase registered in 2005.

Household debt, meanwhile, grew 8.6% in 2006, down from an 11.7% increase in the prior year. The Fed said this deceleration “was accounted for by much slower growth of home mortgage debt.”

Home mortgage debt rose 8.9% last year, compared with a 13.8% jump in 2005. After a five-year boom, the housing market hit a slump last year, discouraging some potential buyers.

The value of households’ real estate equity -- property value minus mortgage debt -- was $10.9 trillion in the fourth quarter, up marginally from the third quarter but up sharply from $7.8 trillion at the end of 2002.

The value of individual stocks and mutual funds held by households grew to $10.4 trillion in the fourth quarter from $10 trillion at the end of the third quarter.

Still, the stock and mutual fund total remained well below the peak of $12.8 trillion at the end of 1999, when the stock market was flying high.

Economists said Thursday’s report suggested that households’ finances were holding up fairly well to any strains caused by the troubled housing market and sluggishness in overall economic growth.

Analysts said that was because the job climate remained good and workers’ income growth had picked up.

“Slower growth in some of the nation’s highflying housing markets was not enough to send net worth south in the fourth quarter,” said Gina Martin, an economist at Wachovia Corp. “Instead, household balance sheets continued to improve, as growth in liabilities continued to slow, while growth in assets held steady.”

One risk facing the economy is that the housing slump will take an unexpected turn for the worse, a development that probably would cause consumers to clamp down. That could spell trouble for overall economic activity.