The net worth of households and non-profits is now at $84.9 trillion in the first quarter of 2015 according to data from the Federal Reserve Flow of Funds. This is a new record and shows that in the aggregate, household balance sheets have never looked better. Net worth is now more than $17 trillion or 26 percent above its pre-recession peak.
After slowing a bit in 2014, total net worth showed a stronger bounce of nearly 2 percent in 2015 Q1 which brought the level up 5.7 percent from one year ago. This is the 22nd consecutive quarter of positive year over year growth.
Net worth is the value of household and non-profit assets (financial and non-financial) less any liabilities (debts).
While a reduction of debt contributed to the increase in net worth earlier in the recovery, the last 3 years have seen liabilities begin to grow again. Growing at a year over year pace of 2.7 percent, liabilities have yet to return to the pre-crisis minimum growth rate of 3 to 4 percent which we saw in recessions of the 1970s and 1980s. This suggests that while the deleveraging may largely be over, credit markets may not yet be back to normal.
In spite of increasing liabilities, net worth moved higher which means that assets are increasing faster. The driver of increases in net worth is the continued growth of home and stock prices. Household real estate accounts for $21.1 of the $99 trillion in household assets and owner’s equity in household real estate is $11.7 trillion of the $85 trillion in net worth.
In the most recent quarter, gains were split roughly two to one between financial assets and real estate, with gains of roughly $1 trillion and $0.5 trillion, respectively.
Households and non-profits are grouped together because current data collection by the Fed is not at a level of detail that would make separation of the two groups possible.