Net worth slipping away
According to the long awaited Federal Reserve Survey of Consumer Finance, the recession has, in fact, hurt American families. The median family net worth plummeted 40 percent from $126,400 in 2007 to only $77,300 in 2010, the last year of the study. The report, released every three years also reveals that the median family income dropped 7.7 percent from $49,600 in 2007 to $45,800 in 2010. Brutal.
Families considered to be middle class were hit the hardest, with those in the 60th to 80th percentile seeing a 40.4 percent drop in net worth – from $215,700 all the way down to $128,600, and families in the 20th to 40th percentile saw a 35.4 percent drop in net worth from $39,600 to a staggering $25,600.
As of 2010, single people over the age of 55 had their net worth drop to nearly 2001 levels, while couples with children were the hardest hit family type, seeing a 41.2 percent drop in median net worth over the three years.
The survey results were expected to be bad, but the final results were staggering, with most Americans’ net worths falling as their property values plummeted during “The Great Recession” as the Fed is calling the economic crisis that some argue is not yet over.
Net worth is down, yet spending is up?
Some have already interpreted the report as Americans’ belts loosening and a willingness to spend coming back, but the Federal Reserve survey says, “The share of families with any type of debt decreased 2.1 percentage points to 74.9 percent over the 2007–10 period, reversing an increase that had taken place since 2001.”
Outstanding credit card balances fell 0.6 percent over the three year period, and the survey does reveal spending, but more so to pay down debt than going out on shopping sprees and letting cash flow freely. Also noted in the report is the type of debts carried having shifted. Families with credit card debt declined by 6.7 percent to 39.4 percent, and the median balance of credit card debt fell to $2,600, representing a 16.1 percent decline during the survey period.
The number of credit cards carried by American families fell, with 32 percent saying in 2010 that they now had no credit cards, up five percent in the three years studied.
The middle class has most clearly been at the brunt of The Great Recession’s brutal blow, with all fingers pointing back to the housing market and the homeowners’ plight of continually falling home values. During this election year, it is not expected that any meaningful legislation on housing will pass, but in 2013, it will be interesting to see how statistics like the Fed’s new report play out on the national stage.