Thursday, February 12, 2009
By the looks of this article at MarketWatch, it appears that Rex Nutting has read the Fed's report on household finances (so far, I've just looked at the chart on the first page) and he came away underwhelmed with the progress we've made as a nation, financially.
The nest egg of the typical American family is smaller now than it was seven years ago, according to Federal Reserve data released Thursday.If the comments section for this article at MarketWatch is any indication, a lot of people are interested in this subject - more than 500 comments in just over three hours.
The inflation-adjusted net worth of the typical family increased 17.7% to $120,300 from 2004 through 2007, the Fed said Thursday in its Survey of Consumer Finances, the most detailed look at family finances available. Net worth is defined as assets minus liabilities.
"But a lot has happened" since the end of 2007, a Fed economist said. As of October, median net worth had fallen to $98,900, down 3.2% from the end of 2007 and 2% below the level reported in the 2001 survey that was conducted after the dot.com bubble burst. Since October, stock prices have fallen another 15%, while home prices have fallen at least 2%.
At the risk of sounding horribly immodest (and I wouldn't mention this if not for the fact that it was quite shocking to see the figure in comparison to what appears above), our net worth has increased by well over 500 percent since since 2001.
Of course, being renters with zero debt during most of that period made it a lot easier than if we were trying to keep up with the Joneses by sucking money out of our house as fast as the price was going up a few years back.
All of which makes the following from Mr. Nutting all the more interesting.
A rising percentage of households were excessively indebted. In 2007, 14.7% of households were paying more than 40% of their income on debt service (including rent) up from 12.2% in 2004. More than a quarter of the poorest households were paying more than 40% of their incomes. The biggest increases in debt-service levels, however, occurred among those making more than median income, especially those at the very top.Should this be surprising?
That people with the highest incomes had the highest increase in debt service levels during that period?
It's really about the cattle, not the hats (see Page 8) and a lot of people didn't know the difference between the two earlier in the decade - they're learning the hard way now.