US household net worth rose to $89.1 trillion in Q2 of 2016, though that number isn’t adjusted for inflation. The figure was released by the U.S. Federal Reserve Bank as part of their quarterly net worth data for American households. The wealth of Americans has grown steadily since 2008, but inflation robs a significant portion of those improvements. The rise in net worth comes from higher stock prices and a corresponding jump in home prices.
U.S. household net worth rose to $89.1 trillion in second quarter: Fed https://t.co/MbTt0lak8J
— Reuters Business (@ReutersBiz) September 16, 2016
Household Net Worth Over Time
Total US Household Net Worth Over Time (In Billions)
|Year||Household Net Worth||% Change|
The table above shows data from the U.S. Federal Reserve’s tracking of household net worth by year. The chart below shows the dramatic rise in the figure since its ten-year low in 2008. The climb looks rosy but it’s not adjusted for inflation. That means the impressive increase is somewhat less striking in reality. In non-adjusted terms, the wealth of the typical American family is the highest it’s ever been, thanks to a climb in the S&P 500 and a jump in home prices. Stocks have rebounded considerably since the crash of 2008. Real estate prices have grown 10% per year since their 2012 trough. The upward trend is slowing though, with stock prices stagnating and home price growth slowing drastically in 2016.
Real Change in Household Net Worth
The chart below shows the percent change in U.S. household net worth adjusted for inflation. It tells a much different story, with actual decreases in the figure since 2008 in some years. Even these data are not thoroughly revealing. That’s because the numbers are only seasonally adjusted. With a normalized inflation adjustment applied to the changes in the net worth of Americans, the curve would almost certainly be a lot flatter.
Household Net Worth by Wealth Group
The apparently rosy data get even scrubbier when we look at the change in household net worth by group. The graph below is from a 2014 study by the Russell Sage Foundation and Michigan State University. The graph shows non-growth in the wealth of median or typical American families between 2011 and 2013. It also shows a decline in the years from 2007 through 2011. The one encouraging fact in the data is that the wealth of the bottom 25th percent of all Americans actually rose at the end of the study. The foundation hasn’t extended their data out through 2016.
There are an estimated 124.6 million households in America. Dividing the $89.1 trillion figure by 124.6 million households gives a per-household net worth average of $714,286. That’s a deceptive figure, since it’s almost certainly skewed higher by the wealthiest Americans. Imagine a group of nine are typical Americans plus Bill Gates. The average net worth of that group is $8 billion, though nine of the people only have $68,000. In the same way, the average American net worth of $714,286 hides a much lower wealth figure for the typical family.
Median Household Net Worth Per Household
To get a real measure of how Americans are doing, what we really need is household net worth per household adjusted for inflation. That’s not an easy figure to find online, mainly because private citizens don’t have to reveal their net worth. The U.S. Census Bureau does regularly release reports showing the estimated wealth of American households over time. They do this by figuring the size and number of stock portfolios and property values, plus estimated cash holdings, divided by the number of American households. Using 24 years of these reports supplemented with Federal Reserve data to fill in the gaps, we created the chart below.
Americans Aren’t Getting Richer
What the graph above shows is that, in inflation adjusted, per-house dollars, the household net worth of the typical family isn’t growing much. There was a steep climb from 1993 through 2005 and then things fell off a cliff. In real terms, the median American family has just recently made it back up to 1998 levels of prosperity.