US household net worth jumps to a record on pricier equities, housing

[NEW YORK] US household net worth jumped to a fresh record in the 4th quarter on rising stock prices and higher home values.

Household net worth rose by US$5.3 trillion, or 3.7 per cent, after a more moderate gain in the third quarter, a Federal Reserve report showed Thursday. The 4th-quarter advance pushed net worth to more than US$150 trillion.

The value of real estate held by households rose by US$1.5 trillion and the value of equity holdings climbed US$2.5 trillion.

While the Omicron variant and related surge in Covid-19 infections dented economic activity in the final weeks of 2021, there was little effect on wealth in the quarter as the S&P 500 rose to new highs. More recently, stocks have slid on concerns about the economic impact from Russia's invasion of Ukraine.

Meantime, mortgage rates have risen to levels not seen since 2019, which could eventually lead to a cooling in the rapid price gains seen in the housing market. In an effort to tame inflation, the Fed next week is expected to raise interest rates for the first time since 2018.

Not everyone has benefited from the surge in home and equity prices. Survey data indicate that just a little more than half of Americans own stocks, and millions of Americans rent. Separate data out Thursday showed rent of primary residence climbed in February by the most since 1987.

While pandemic aid programmes like the advance child tax credit payments have since ended, elevated savings remain a key source of support for household spending. Net private savings grew at an annualised pace of US$2.4 trillion in the fourth quarter, though the pace has been settling back since the start of 2021. Business debt outstanding increased at an annualised rate of US$1.2 trillion from the prior quarter in the October-December period to a total of US$18.5 trillion.

Federal debt rose at an annualised rate of 10.8 per cent to US$25.3 trillion. Government debt has surged over the past two years amid trillions of dollars in federal aid to workers, businesses and local governments during the pandemic.

Consumer credit outstanding, not including mortgage debt, rose an annualised US$302 billion in the fourth quarter.

BLOOMBERG

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