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Economy takes toll on American wealth

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Americans are worth less than they used to be, according to data released by the U.S. Census Bureau.

The average U.S. household net worth declined 35 percent between 2005 and 2010, from $102,844 to $66,740 (in 2010 constant dollars), according to a set of detailed tables recently released by the Census Bureau.

Excluding home equity, median household net worth increased by 8 percent between 2009 and 2010, from $13,859 to $15,000, the Census Bureau’s report shows.

The Net Worth and Asset Ownership tables show household net worth – the value of assets minus debts – by a variety of demographic characteristics in 2005, 2009 and 2010. The statistics come from the Survey of Income and Program Participation.

This data comes one week after the Federal Reserve announced the typical American family lost nearly 40 percent of its wealth between 2007 and 2010 due to the Great Recession. Household net worth reduced to levels not seen since the early ‘90s.

Net worth of the median U.S. family — one with an equal number of families richer and poorer — fell to $77,300 from $126,400 in just three years, after adjusting for inflation, the Federal Reserve reported in early June.

According to these figures, net worth for households has dropped in 2010 compared with 2005 primarily due to falling home prices, causing declines in home equity, says David Penn, director of the Business and Economic Research Center at Middle Tennessee State University.

“Figures for Middle Tennessee do not exist, but I would expect our area would follow the national trend,” he said.

 Penn explained how the flow of funds reports from the Federal Reserve System show a similar trend.  

“Home equity and stock market holdings are the two biggest sources of wealth held by households. When wealth declines, households tend to cut back on expenditures, thus slowing the pace of recovery,” he continued. “Though stock prices have generally been rising during the past couple of years (excluding the past two months), continued declines in housing prices depresses household wealth and keeps spending growth low.”

In absolute terms, median net worth decreased for all age groups over the period, but more so for older households than for younger ones. For householders 65 and older, it decreased from $195,890 to $170,128; for those under 35, the decrease was from $8,528 to $5,402.

In percentage terms, however, the story was much different: a 37 percent decline for younger householders, compared with a 13 percent decline for older ones.

All educational groups also experienced declines. For example, those with a high school diploma saw their median net worth fall 39 percent and those with a bachelor’s degree experienced a 32 percent decline.

Additionally, more education is associated with higher net worth. In 2010, those with a graduate or professional degree had a median net worth of $245,763, while the median net worth of those with a high school diploma only was $42,223. Those with a bachelor’s degree had a median net worth of $142,518.

These dollar figures are all in 2010 constant dollars.

In 2000, those with a bachelor’s degree had a median net worth value almost twice as large as those with a high school diploma only; by 2010, this number had risen to almost three and one-half times as large. The same pattern can be seen when examining the graduate or professional degree to high school diploma ratio; this ratio has increased from 3.5 to 5.8 over the same period.

Householders ages 35 to 44 had the largest percent decline in median net worth from 2005 to 2010 of any age group: 59 percent.

These data were collected in the Survey of Income and Program Participation. As in all surveys, these data are subject to sampling and nonsampling error.
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Business, Census Bureau, Economy, Federal Reserve, Finance, Politics, Tennessee
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