Fed: Stagnant Net Worth for Typical US Family

Every 3 years, the Federal Reserve undertakes a massive survey of nearly 5,000 US families. The interview process is comprehensive, covering all manners of financial information — and its intensive, taking between 80 minutes and 2 hours.

Its the Federal Reserve’s Report on U.S. Family Finances, and it quantifies what most people already know: The average family is not making much economic progress:      

"After growing rapidly during the boom of the 1990s, the net worth of the typical American family rose only 1.5% after inflation between 2001 and 2004, the Federal Reserve said in an update of a survey it does once every three years.

The Fed said the net worth of the median American family — the one smack in the statistical middle — was $93,100 in 2004. Net worth, the difference between a family’s assets and liabilities, rose a robust 10.3% between 1998 and 2001 and 17.4% in the three-year interval before that.

A booming housing market boosted the typical American family’s wealth between 2001 and 2004, but stagnant stock prices and rising debt offset many of those gains."

The Fed helps explain what many politicans have been unable to grasp: the disconnect between rosy economic headline data and real life experiences for most families.

The report also gives lie to much of the foolish spin we have heard from some politicians and from the economic charlatans — those people who know better (or at least should know better), but knowingly deceive the public in pursuit of their own political or economic agenda.

A few items pop out from the report:

•  Rising debt has offset the boom in housing;
•  Inflation continues to eat into family cash flow;
•  Income remains stagnant;
•  Savings has slipped to zero; 

click for larger graphic


courtesy of WSJ

And, its no surprise that the gap between economic strata has widened. This is part of the ongoing squeeze on the middle class:

"The report, the most comprehensive survey of household wealth, also found a widening of the gap between households at the top and the bottom of the economic ladder. "While the typical American household basically ran in place, less affluent households actually lost ground," said Stephen Brobeck, executive director of the Consumer Federation of America.

The net worth of the typical family in the richest 10% rose to $831,600, a 6.5% increase from 2001, adjusted for inflation. In contrast, the net worth of the typical family in the bottom 25% fell 1.5% to $13,300.

Meanwhile, the typical family took on more debt. After declining for years, mortgage and other debt as a percentage of total family assets rose to 15% in 2004 from 12.1%, the Fed said. "The largest part of that increase was attributable to debt secured by real estate," the report said. "As debt rose over the period, families devoted more of their incomes to servicing their debts, despite a general decline in interest rates."

All of the above has been very visible in the economic data, if you ignore the headlines and dig into thge underlying data: Job creation, income, inflation, debt, savings rate, foreclosure and bankruptcy. 

Which ever political group figures this is the primary basis for the disconnect between the so called official data and the self reported economic concerns — and responds to it — stands to do well in the next election . . .   


Typical U.S. Family’s Net Worth Edged Up Only 1.5% in ’01-’04
WSJ, February 24, 2006; Page A4

Recent Changes in U.S. Family Finances:
Evidence from the 2001 and 2004 Survey of Consumer Finances

Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore
Federal Reserve Board, Division of Research and Statistics
February 2006

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What's been said:

Discussions found on the web:
  1. jim blackburn commented on Feb 24

    Things aren’t so good down here in the trenches.

  2. Anonymous commented on Feb 24

    Our congressional districts have been so gerrymandered and our neighborhoods so balkanized in their social structures that how we vote has little to do with the (predetermined?) political outcome. Just look at the percentage of congressional incumbents winning reelection.

  3. me commented on Feb 24

    Slightly off topic for which I apologize, but has anyone ever condisered the effect on the unemployemet rate by all the employees that are fired and then brought back as contractors, when they are laid off? They cant collect unemployment so are they counted as unemployed or self-employed?

  4. David Silb commented on Feb 24

    I think we have been discussing this topic in many ways for the past months. Now relatively hard data to back it up. Sooner or later all markets adjust. Sooner or Later.

    The perma-Bulls might find themselves saying: “Where did all that positive economic data go? But i have charts and statistics……”

    I think if current trends continue as described in this piece the consumer will have no choice but to stop current spending levels.

    When that happens lets see what rabbits get pulled out of what hats.

  5. howard commented on Feb 24

    i’ve been saying, for nearly 3 years now, that the logical outcome of bush-league economics is stagflation lite. the evidence is all around us.

    as with iraq, it’s not something i’m happy about being right about.

  6. Lord commented on Feb 24

    Look on the bright side, stagnant incomes mean no inflation, right? Oil doesn’t count after all. More tax cuts anyone?

  7. critical thought commented on Feb 24

    you mean, net worth has declined in the days since NASDAQ 5000? Does this really surprise anyone? If this is surprising, how are you reading this blog?

    and now, debt is higher, but, the article says this is mostly mortgage debt. The nexus between this rising debt and “people are in deep trouble” or “tapped out” isn’t crystal celar. . .

    finally, on the overall numbers, how do we ensure that there isn’t a selection bias in the numbers? And how would we account for it? If immigration is high, and it is, shouldn’t we expect the lower percentiles to lose ground?

    a critical reader should require a little more information to make a good judgement about this. . .

  8. D. commented on Feb 24

    I have a report (Mortgage Interest Reset from First Amercian Real Estate Solutions) that shows that 29% of mortgages originated in 2005 have no equity. If prices go down by 10%, 47.7% of these mortgages will have no equity. Since most homeowners have refinanced in the last few years you can see that these numbers are pretty dire.

  9. Paul commented on Feb 24

    Glad to see you address this. Frankly, your title should be:

    “Stagnant Median Net Worth of Families Masks Growing Inequality: Rich Get Richer & Poor Fall Further Behind”

    Maybe that sounds radical, but its also exactly what the Fed report says.

  10. calmo commented on Feb 24

    critical thought critically examines the report and demands another larger report. An investigation maybe.
    Were there any Mexicans among those 5000 participants? [Were the standards the same as the pervious reports? Should they have been?]
    In that upper eschelon, the top 1%, (here a mere 50) did some brag it up or hide or claim to be too busy to complete the 2 hr report? [Does the report catch the top 0.1%? the top 0.01%? Should it?]
    I’d say this report coming from the Fed is going to under report the disparity in wealth. But I do have some concerns that the ‘net worth’ of the 2 previous periods was distorted by stock values that later plunged.
    Overall, persuasive (only for the somewhat critical) confirmation that the economy is growing only for a very few.

  11. Steve commented on Feb 24

    Quick question — I couldn’t find this anywhere — How is the fed defining ‘Net Worth’? Surely it’s not assets less ALL liabilities (such as real estate) because that would put nearly everybody in the US at a negative net worth.


  12. howard commented on Feb 24

    calmo, remember that only roughly half of US households own stock, and the median level of ownership is somewhere in the mid 5 digits, so while admittedly there was probably some degree of “distortion,” i suspect it was relatively modest for most households.

    Steve, why do you think that? there aren’t that many homeowners underwater….

  13. Steve commented on Feb 24

    I’m not saying their homes are underwater, but rather I know a lot of people in homes that they owe $200k-$400k on and they do not have nearly as much in assets. Suppose they have $100k in assets, then would their net worth be -$300k?

  14. Laurent GUERBY commented on Feb 24

    Is the fed making some of this data available somewhere? Like complete series of wealth / from stock / from house / other, a few distributions could be interesting to look at.

    Thanks in advance,


  15. howard commented on Feb 24

    steve, i’m still not following: if your home is not underwater, then your net worth within that home is the current market value minus the mortgage outstanding (i.e., you owe $200K but the house is worth $250K, hence your equity value in the house is $50K).

    so someone who had another $100K in assets free and clear would have a net worth of $150K in that example.

    does that help?

    Laurent, go here:


    if you click through on the 2004 link, you’ll see that the detailed data will be posted on march 3. if you look at a previous version, you’ll see that there’s a tremendous amount of detailed data made available.

    you can also take a look here to get a lot of interesting material from the census bureau regarding household net worth as of 2000. the fed study is more detailed, but, of course, merely a survey set, whereas the census bureau material is based on…the census!


  16. calmo commented on Feb 25

    Howard, in that previous period, the study would have captured the stock market near its apex. Not only a fair chunk of the hoi polloi jumped onto that band wagon but many respectable looking pensions decided that they, too, needed something less conservative.
    If the snap shot is taken only a year later, the previous period would not have that robust stock component.
    Likewise the current net worth includes real estate values that may turn south, (unlike the mortgages on them).
    Small quibbles really. Tom Bozzo at Marginal has some more detailed numbers, but I still think it gives us no picture of the ~$100M+ segment. I refuse to believe that everyone is not doing as well –I am such a crank.

  17. School Information System commented on Feb 25

    Taxes: Fed; Stagnant Net Worth for Typical Family

    This site, along with many others includes discussion on public school finance. Public education money is currently generated from local property taxes, fees and redistributed state and federal funds (via income, energy and other taxes. Barry Ritholtz …

  18. Steve commented on Feb 25

    Thanks Howard. I was missing the market value of the home part of the equation. I was just taking the liabilities part of it.


  19. kmr commented on Feb 25

    Does anyone know if the Fed takes into account savings in 401K, IRA’s and college funds? Also when calculating credit card debt do they use the total debt available or what is actually serviced?

    Thre reason I ask is I read in the past an analysis from one of the investment houses who proposed it is not as bad as described for the median american household if retirement and college accounts are taken into account and acounting for credit card debt that is actually serviced.

    Thanks in advance.

  20. School Information System commented on Feb 25

    Taxes; Fed: Stagnant Net Worth for Typical Family

    This site, along with many others includes discussion on public school finance. Public education money is currently generated from local property taxes, fees and redistributed state and federal funds (via income, energy and other taxes. Barry Ritholtz …

  21. Leisa commented on Feb 25

    Net worth: I would imagine that the Fed calculates net worth in accordance with the way that net worth is defined. Quite simply, net worth is the difference of your total assets (at market value–which would include the net present value of any annuitized assets) less liabilities–actual liabilities, not potential liabilities such as the unused line of credit. Accordingly, your home and investments would be at current market value and your net worth is subject of the vagaries of the residential and equity markets. If you were receiving a 20 year annuity payment, you would compute the NPV using the stated or calculated interest rate to discount to NPV. Mortgage debt is based on the current loan balance, not the face value. Unused lines of credit are NOT counted, but naturally lending/credit institutions look at them for the potential debt load you can incur. I personally feel that the real estate muddle of interest only loans at 100% of market value are going to send a few institutions south should there be a recession. I would avoid any investment highly levered to mortage lending, mortage assets. If the real estate market makes a hard landing coupled with a recession, I suspect that we will see an astronomical rate of foreclosures. There is no room for even the smallest margin of earning error for tapped out homeowners.

  22. howard commented on Feb 25

    kmr, basically, yes, they do take all of this into account. i’ll have to root around for a recent study (i should have bookmarked it) about stock ownership and american households (it’s where i got the numbers i mentioned to calmo at 7:31), but basically, when i say that half of american households own stock, that’s including retirement accounts, college accounts, and all other forms of stock ownership. iirc, something like 1/3 of those 50% only own stock (or mutual funds) via retirement accounts.

    there are, of course, multiple complexities: for example, some people argue that because of things like mileage-reward credit cards, we are seeing an overstatement of credit-card debt, and what matters is the debt people roll over on their credit cards, not the “inflated” amount that is paid off when due. i actually have a link to a study a hedge-fund analyst friend sent me on this, but it’s in my office computer, not the home computer from which i’m typing this. i’ll try to get back to you on it later this weekend. it’s basic point was that if you make an adjustment, instead of monthly minimum payments on credit card debt being at an all-time high, it’s only nearly an all-time high, which some people regard as a positive for reasons beyond me.

    calmo, i don’t know that we’re disagreeing: i can’t actually tell! all i’m saying is that regardless of the point when you take the snapshot, the vast majorities don’t own enough equities in general for NASDAQ bubbles to have made much difference.

    more broadly, sure: any snapshot is subject to the vicissitudes of the moment in time (i need to double-check, btw, since it’s been a few months since i looked at the 2001 study, as to whether the fed’s work is only a “moment” in time or many moments in time, adjusted in some fashion). Still, this particular study is regarded as the most detailed household study there is, and so, with the proper grains of salt, is highly useful.

    laurent, steve: you’re welcome.

  23. Gary Anderson commented on Feb 25

    In Reno, there were 1800 new listings in Jan 06. There were already 3300 new listings. Only 500 houses sold in Jan 06 in Reno. I would say that there is a major economic distress about to happen here. I see many more houses going on the market this year as Bernanke continues to raise rates to clip inflation and these interest only and arm loans become adjusted. This may be a long process, but in Reno, you price your house LESS than your neighbors if you even want a chance at selling.

  24. Larry Nusbaum, Scottsdale commented on Feb 26


  25. Sad Parade commented on Feb 26

    Net Worth: For Average American Families, It’s Stagnant

    In the last five years, the tax relief you passed has left $880 billion in the hands of American workers, investors, small businesses, and families — and they have used it to help produce more than four years of uninterrupted

  26. Sad Parade commented on Feb 26

    Net Worth: For Average American Family, It’s Stagnant

    In the last five years, the tax relief you passed has left $880 billion in the hands of American workers, investors, small businesses, and families — and they have used it to help produce more than four years of uninterrupted

  27. angryinch commented on Feb 27

    Hey Larry,

    Your anger management class called and wondered why you weren’t there last week.


    A. Inch

  28. richard commented on Mar 3

    net worth for individuals should exclude house value and corresponding mortgage debt. that would leave all liquid assets such as checking, savings, stocks and money market accounts measured against loans and charge account debt as well as all other persaonal debts. we all have to live somewhere so house values vs, mortgage debt is illusory.

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  30. Prose Before Hos commented on Jan 13

    Average Income of Americans Compared to Presidential Candidates

    Perhaps only one word can be used to describe all of the leading presidential contenders: multimillionaire.

    Rudy Giuliani – 40 Million Dollars
    Mitt Romney – 100 Million Dollars*
    Hillary Clinton – 51 Million Dollars
    John McCain – 35 Million Dollar…

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