By Harriet Torry, wsj.com
Household wealth in the stock market increased by about $848.3 billion in the quarter
The total net worth of U.S. households rose farther into record territory in the second quarter, propelled by climbing home values and stock prices.
Household net worth—the value of all assets such as stocks and real estate minus liabilities like mortgages and credit-card debt—rose by nearly $2.2 trillion in the second quarter to a record $106.929 trillion, according to a report by the Federal Reserve on Thursday. That marked a 2.1% increase from the first quarter and the eleventh straight quarter of rising U.S. wealth.
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The figures are from a quarterly report known as the Flow of Funds, which tracks the aggregate wealth of all U.S. households and nonprofit organizations. The report provides no details of how that wealth is distributed between households. The figures aren’t adjusted for inflation.
The report showed American households collectively remained on a strong financial footing as they headed into the second half of this year. Households’ holdings in the stock market climbed by $848.3 billion in the second quarter after declining in the first three months of the year.
The value of households’ real estate rose by $558.9 billion in the second quarter, a better gain than in the prior quarter, reflecting the fact that home prices are rising at time when demand for housing is high.
The value of owner-occupied housing climbed to more than $25 trillion in the second quarter, against roughly $10 trillion in mortgages. U.S. home prices rose 1.1% in the second quarter, according to the Federal Housing Finance Agency’s house-price index, and posted a 6.5% year-over-year gain.
Rising stock and housing prices “are really creating a kind of foundation for the economy,” said Joel Naroff, president of Naroff Economic Advisors.
Households also have $9.561 trillion in deposits, which include checking and savings accounts and certificates of deposit.
Higher household wealth in the second quarter came against a backdrop of strong spending by consumers and businesses, which drove robust economic growth. In the April to June period, gross domestic product—the value of all goods and services produced across the economy—rose at a 4.2% annual rate, adjusted for seasonality and inflation.
As the value of households’ assets increased so did their liabilities. The report said household debt increased an annual rate of 2.9% in the second quarter, well below the double-digit annual rates in the mid-2000s.
“Households have a lot of net worth,” said Steven Blitz, chief U.S. economist at TS Lombard, adding however that “hasn’t generated an increase in leveraged spending” compared with earlier periods in which net worth was rising sharply.
U.S. households’ collective net worth was close to seven times their total after-tax personal income in the second quarter, at 691.9%. That was up from 685.1% in the first quarter and well past the earlier prerecession peak of 668.5% in the first quarter of 2006.
Americans saved slightly less in the second quarter: the saving rate was 6.82%, down from 7.16% in the first quarter.
The data on household net worth include assets held by nonprofits, although they account for a small share.