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American households have recovered the $16 trillion in wealth destroyed during the crisis

By Matt Phillips
Published Last updated This article is more than 2 years old.

It’s no secret that recession was painful to American households. Even if they managed to keep their jobs, the twin collapse of stock prices and home values inflicted serious damage to their balance sheets, vaporizing some $16 trillion in wealth between the third quarter of 2007 (the previous peak in household wealth) and the first quarter of 2009 (when then net worth of American households hit bottom).

But check this out. American household finances—at least in aggregate—are in better shape than ever. During the first quarter, net worth rose by some $3 trillion, to a new high of $70.3 trillion, according to the most authoritative report on the subject, just published by the Federal Reserve.

How did this happen? Well, real estate prices have been rising quite a bit lately. (Yes, off a low base.) The price increase lifted the value of the residential real estate households own by $738 billion in the first quarter alone.

Meanwhile, the the stock market has been on a tear. The S&P 500 rose 10% during the first quarter. The Dow rose 11%, its best quarter in 15 years. That supercharged the value of the equities and mutual funds owned by households. They rose by about $1.5 trillion during the first quarter. Check it out:

Now, as we’ve told you before, these numbers gloss over the fact that many Americans are still hurting. That’s because the stock market is mostly owned by a few relatively wealthy families, which means that they’ve benefited from the rally in stocks much more than your average American household. Another thing: there are more people now than there were in 2008, so the rise in wealth has to be spread over more people. Also, because of inflation, a 2013 dollar has less buying power than a dollar did just a few years ago. The Federal Reserve Bank of St. Louis crunched the numbers and came up with these charts on how US household wealth—through the end of 2012—would look if it were adjusted for inflation and population growth. Paints a different picture, doesn’t it? According to UBS economists, inflation-adjusted net worth per household is still about 10% below its 2007 peak.

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