Household wealth in the U.S. increased from October through December, as gains in stock portfolios and home prices boosted Americans’ finances.
Net worth for households and non-profit groups rose by $2.95 trillion in the fourth quarter, or 3.8 percent from the previous three months, to a record $80.7 trillion, the Federal Reserve said today from Washington in its financial accounts report, previously known as the flow of funds survey.
More jobs, higher stock prices and improved home values have all helped consumers clean up their balance sheets in the years following the biggest recession since the Great Depression. Additional gains in the labor market and household wealth will be needed to give consumers the means to spend on goods and services, boosting economic growth.
“There will be further gains in household net worth, but maybe not at the pace we saw in 2013,” Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford, Connecticut, said in an interview before the report. “On the equities side, it’s still good, but it’s less robust than last year. On the housing side, the back-up in rates takes a little bit off demand, so the pace of price appreciation cools a bit.”
The value of financial assets, including stocks and pension fund holdings, held by American households increased by $2.52 trillion in the fourth quarter, according to today’s Fed report.
The Standard & Poor’s 500 Index climbed 9.9 percent from Sept. 30 to Dec. 31, capping the best yearly gain since 1997.
Home Prices
An improving housing market also boosted household wealth. The S&P/Case-Shiller national home-price index rose 11.3 percent in the fourth quarter from the same period in 2012, the biggest year-over-year advance since the first three months of 2006.
Household real-estate assets climbed by $401.1 billion, the data show. Owners’ equity as a share of total household real- estate holdings increased to 51.7 percent last quarter from 50.6 percent in the previous three months.
The Fed is trying to preserve improvements in household net worth by maintaining an accommodative stance, even as it scales back its unprecedented stimulus program.