Census: U.S. wealth fell 35% in 5 years
The nation's median household net worth declined by 35 percent between 2005 and 2010, largely due to the declines in housing values and the stock market, according to a U.S. Census Bureau report released Monday.
The report estimated that household net worth declined from an inflation-adjusted $102,844 in 2005 to $66,740 in 2010. When home equity was excluded, however, there was a modest 8 percent increase in net worth, from $13,859 to $15,000, the report said.
Alfred Gottschalck, a Census Bureau economist, said in an interview that the "drop in housing values was the predominant factor" in declining net worth. He also noted stock market declines as a factor.
In the Fed's survey, Americans' median net worth dropped from $126,400 in 2007 to $77,300 in 2010. The decline in housing prices was responsible for the bulk of the losses, the Fed said.
The Fed also reported a decline in median income, particularly among middle-class families.
"The takeaway from these figures is the outlook for future consumer spending is gloomy," said Pearl Kamer, chief economist for the Long Island Association, the region's largest business group.
"This is nationally, but it applies to Long Island as well," she said. "It's going to take a long time for households to recoup this net worth. Therefore, they will be cautious in their expenditures. They're only going to buy what they need."
She anticipates a slow recovery. "Even when home prices turn around," Kamer said, "which they will nationally, probably by the end of this year or early next year, you'll see increases of about 2 percent annually." That's far below the "boom" years, when prices rose by as much as 15 percent to 20 percent annually, she noted.
Gottschalck said the bureau has conducted its Survey of Income and Program Participation since the 1980s. He could not immediately say whether the 35 percent drop in net worth was the largest it had ever recorded.
To Kamer, the loss in net worth is unprecedented. "We never saw such a decline in household net worth" in the post-World War II period, she said. The housing market was not a big factor in most prior recessions, except for the Great Depression, she said.
The Census Bureau's net worth and asset ownership tables showed that net worth decreased among all groups between 2005 and 2010. While people ages 65 and older had larger dollar losses -- going from $195,890 to $170,128 during the period -- people younger than age 35 had larger losses in percentage terms.
Younger households had a 37 percent decline, compared with a 13 percent decline among older ones.