Americans' wealth hit a fresh record in the first quarter amid a rise in home values and stock prices, a trajectory poised to continue as U.S. markets push higher but one that doesn't necessarily figure to rev up the sluggish recovery.
The net worth of U.S. households and nonprofit organizations—the value of homes, stocks and other assets minus debts and other liabilities—rose roughly 2%, or about $1.5 trillion, between January and March to $81.8 trillion, the highest on record, according to a report by the Federal Reserve released Thursday. The figures aren't adjusted for inflation or population growth.
Economists are hoping improvements in household balance sheets could help propel an economy that wobbled early this year when an unusually harsh winter took a bite out of growth.
The U.S. stock market rose in the first quarter, with the broad Standard & Poor's 500-stock index nudging up about 1% after a 30% gain last year. Real-estate values also rebounded strongly last quarter, helping spread the benefits of the nation's economic improvements. The value of stocks and mutual funds owned by households rose $361 billion last quarter, while the value of residential real estate grew more than twice that, $751 billion, according to the Fed.
For many Americans, housing is the most important financial asset. As real-estate values rise, Americans are gaining more equity in their homes, which makes it easier to sell them, refinance debts, borrow and spend.
Another positive sign in Thursday's report: Americans are feeling a little more comfortable about borrowing.
Overall household borrowing rose in the first quarter. While mortgage debt shrank, other types of consumer credit, including student loans, grew.
After years of digging out from heavy debts assumed during the boom years, Americans are now finding their debt burdens easing. Total U.S. household debt was about 108% of disposable income in the first quarter, down from a peak burden of roughly 135% in 2007.
A more manageable debt burden, along with rising levels of equity in homes, could prompt American households to borrow and spend more at a time when unemployment remains high and wages are only starting to rise after years in the doldrums.
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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.
The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville. The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.
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