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Thursday, December 09, 2021

Fed's Flow of Funds: Household Net Worth Increased $2.4 Trillion in Q3

by Calculated Risk on 12/09/2021 12:55:00 PM

The Federal Reserve released the Q3 2021 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $144.7 trillion during the third quarter of 2021. The value of directly and indirectly held corporate equities decreased $0.3 trillion and the value of real estate increased $1.4 trillion.
Household debt increased 6.2 percent at an annual rate in the third quarter of 2021. Consumer credit grew at an annual rate of 5.3 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 7.8 percent.
Household Net Worth as Percent of GDP Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

With the sharp decline in GDP in Q2 2020, net worth as a percent of GDP increased sharply.  This reversed somewhat in Q3 as GDP bounced back (even as net worth increased).   But now net worth as a percent of GDP is just below the all-time high set in Q2.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

Household Percent EquityThis graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2021, household percent equity (of household real estate) was at 68.8% - up from 68.3% in Q2. This is the highest percent equity since the 1980s.

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So, the approximately 50+ million households with mortgages have less than 67.7% equity - and about 470 thousand homeowners still have negative equity.

Household Real Estate Assets Percent GDP The third graph shows household real estate assets and mortgage debt as a percent of GDP.  Note this graph was impacted by the sharp decline in Q2 2020 GDP.

Mortgage debt increased by $230 billion in Q3.  This is the largest quarterly increase in mortgage debt since 2006.

Mortgage debt is up $800 billion from the peak during the housing bubble, but, as a percent of GDP is at 49.6% - up slightly from Q2 - and down from a peak of 73.3% of GDP during the housing bubble.

The value of real estate, as a percent of GDP, increased in Q3, and is well above the average of the last 30 years.