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Recession kicked median household wealth to 1992 level

lpast

lpast

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The median U.S. household lost nearly 39% of its wealth from 2007 to 2010, the Federal Reserve said Monday, emphasizing anew the impact of the financial crisis and the recession on ordinary Americans.

Middle-class families took the biggest hit to their net worth during the crunch because much of their wealth was in their homes, whose values plunged during the recession and in its aftermath, the Fed report said. Wealthier families saw a smaller drop in their incomes, but nowhere near as much impact on their net worth.


"Richer people owned more bonds that didn't get killed," Hoyt said. "For middle-income households, their primary asset is their house, and the government stimulus backstopped incomes at the low end."
The median family's net worth dropped to $77,300 from $126,400 in 2007, the Fed said. The wealthiest 10% of families saw their median net worth rise 1.9% to $1.17 million.

The last paragraph is the most pertinent, The middlecass net worth dropped from 126,400 to 77,000 and the RICH got richer. The evidence is all there right in front of everyones nose.

Fed: Recession kicked median household wealth to 1992 level
 
lpast said:
The median U.S. household lost nearly 39% of its wealth from 2007 to 2010, the Federal Reserve said Monday, emphasizing anew the impact of the financial crisis and the recession on ordinary Americans.

Middle-class families took the biggest hit to their net worth during the crunch because much of their wealth was in their homes, whose values plunged during the recession and in its aftermath, the Fed report said. Wealthier families saw a smaller drop in their incomes, but nowhere near as much impact on their net worth.


"Richer people owned more bonds that didn't get killed," Hoyt said. "For middle-income households, their primary asset is their house, and the government stimulus backstopped incomes at the low end."
The median family's net worth dropped to $77,300 from $126,400 in 2007, the Fed said. The wealthiest 10% of families saw their median net worth rise 1.9% to $1.17 million.

The last paragraph is the most pertinent, The middlecass net worth dropped from 126,400 to 77,000 and the RICH got richer. The evidence is all there right in front of everyones nose.

Fed: Recession kicked median household wealth to 1992 level
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Housing prices dropped.
Which is the cause of the this.

As I said in another thread, houses are liabilities not assets.
Putting the largest share of your wealth, in an illquid speculative "investment" is foolish.
 
Yeah I don't really view houses as an asset either, or much of an investment for wealth for that matter. Unless you buy a home for a rental property, or are a flipper who does it for fun with no skin on your back lost if it doesn't make any money, houses should be bought as a place to live and call home, and nothing more. Buying a house with the expectation that it will increase in value, or not decrease in value, isn't very wise, IMO.
 
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The Man said:
Yeah I don't really view houses as an asset either, or much of an investment for wealth for that matter. Unless you buy a home for a rental property, or are a flipper who does it for fun with no skin on your back lost if it doesn't make any money, houses should be bought as a place to live and call home, and nothing more. Buying a house with the expectation that it will increase in value, or not decrease in value, isn't very wise, IMO.
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Paradigm shift complete.
 
Harry Guerrilla said:
Housing prices dropped.
Which is the cause of the this.

As I said in another thread, houses are liabilities not assets.
Putting the largest share of your wealth, in an illquid speculative "investment" is foolish.
Click to expand...

Um, not sure I agree Harry, of all the investments one can make, real estate is about as safe as it gets, housing crash of 2008 notwithstanding. :)

Tim-
 
Harry Guerrilla said:
Housing prices dropped.
Which is the cause of the this.

As I said in another thread, houses are liabilities not assets.
Putting the largest share of your wealth, in an illquid speculative "investment" is foolish.
Click to expand...

My home is paid off. I pay my monthly bills and $800 a year in taxes, how exactly is that a liability?
 
This is Breaking news?
http://www.debatepolitics.com/economics/90108-truth-can-afford-pay-taxes.html

Spreading the wealth - Los Angeles Times
November 08, 2010
By Michael I. Norton and Dan Ariely

The gap between rich and poor in the U.S. is bigger than at any time since the 1920s. Is that really what most Americans want?

The gap between the wealthiest Americans and the poorest is bigger than at any time since the 1920s — just before the Depression. According to an analysis this year by Edward Wolff of New York University, the top 20% of wealthy individuals own about 85% of the wealth, while the bottom 40% own very near 0%.
Many in that bottom 40% not only have No assets, they have Negative net wealth.

A gap this pronounced raises the politically divisive question of whether there is a need for wealth redistribution in the United States. This central question underlies such hot-button issues as whether the Bush tax cuts should be allowed to expire and whether the government should provide more assistance to the poor. But before those issues can be addressed, it's important to understand how Americans feel about the country's increasing economic polarity.

We recently asked a representative sample of more than 5,000 Americans (young and old, men and women, rich and poor, liberal and conservative) to answer two questions. They first were asked to estimate the current level of wealth inequality in the United States, and then they were asked about what they saw as an ideal level of wealth inequality.

In our survey, Americans drastically underestimated the current gap between the very rich and the poor. The typical respondent believed that the top 20% of Americans owned 60% of the wealth, and the bottom 40% owned 10%. They knew, in other words, that wealth in the United States was not distributed equally, but were unaware of just how unequal that distribution was....
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Blue_State said:
I am insanely jealous of your property taxes. CT is not so low.
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Same here! I'm in PA, and where I live, in a modest 1500 sqft home that is well below the average home value in my county, township and school district, my annual property taxes are well over double $800/year.
 
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Prof. Peabody said:
My home is paid off. I pay my monthly bills and $800 a year in taxes, how exactly is that a liability?
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According to the OP statistics, people investing mostly in their homes, lost money, while people investing in (other areas), saw gains.
What do you call that?

notice lpast is trying to imply some broader evil lurking below this. I mean, what are those who have enough to buy a house 10x over supposed to do to be "fair"? Just keep buying houses that way if the housing market drops, they lose just as much as someone middle class who invested heavily in their home? Makes no sense. All people should diversify if their goal is long term gains and they want to avoid short-term risk. That goes for anyone.

A lot of people who lost jobs in the downturn, could then no longer afford the house note. I'm pretty sure they experienced the liability.
 
With any investment their are risks, buying a house is an investment, thus it's a risk. It was not hard to see the housing crash coming. When lenders are loaning money to people that have no job, no money, and no credit, what does one expect.
 
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Hicup said:
Um, not sure I agree Harry, of all the investments one can make, real estate is about as safe as it gets, housing crash of 2008 notwithstanding. :)

Tim-
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I agree and disagree.
Yes real estate can be a great investment, however, leveraging your primary residence (which has all the trappings of a constant liability) is very, very, very dumb.
 
Yes real estate can be a great investment, however, leveraging your primary residence (which has all the trappings of a constant liability) is very, very, very dumb.
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Not necessarily. This, like leveraging your retirement, for example, has its place.
 
Rhapsody1447 said:
Paradigm shift complete.
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There should never have been a paradigm of housing-as-a-failsafe-investment to shift in the first place. The historic experience with real estate has been low appreciation over long periods of time, as documented by Yale economics professor Robert Shiller (co-creator of the Case-Shiller housing values index). Unfortunately, history is not given the attention it deserves, including in economics. A sound understanding of history can give one a sense of proportion and what's realistic.

In today's testimony before the Senate Banking Committee, JP Morgan CEO Jamie Dimon stated that his firm's traders did not understand the risks involved in their hedging strategy. To borrow from Yogi Berra, that's "deja vu all over again." Lack of understanding of risk was one of the significant factors involved in the run-up of the housing bubble and the myriad financial instruments involved. Already, in some quarters, even the recent lessons of the financial crisis have been forgotten. That's not exactly a strong foundation from which to argue against new banking regulations. Instead, the experience demonstrates anew the limits of risk management.
 
Khayembii Communique said:
Not necessarily. This, like leveraging your retirement, for example, has its place.
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Yes. That place is "paying for emergency, life-saving medical care". Things like starting businesses, financing education, buying investment property, or taking vacations... not so much.
 
Yes. That place is "paying for emergency, life-saving medical care". Things like starting businesses, financing education, buying investment property, or taking vacations... not so much.
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You can usually get lower rates by leveraging your home or taking a loan out on your retirement, so provided you have a reliable exit strategy in the case of complete failure you might be better off doing so. It's the same with any kind of loan: you need an exit strategy.
 
Khayembii Communique said:
You can usually get lower rates by leveraging your home or taking a loan out on your retirement, so provided you have a reliable exit strategy in the case of complete failure you might be better off doing so. It's the same with any kind of loan: you need an exit strategy.
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Maybe, but we're talking about the average home purchaser, not you or Harry or Don.
The sort of people that would be able to reasonably do what you suggest, aren't the same people who on average got crushed during the housing crisis. Remember these are people who didn't even get the first loan correct, no way they are going to devise an exist strategy and also get that right...

Or rather, since they could have, and didn't, we know it's not the case that such advice is sufficient.
 
Khayembii Communique said:
Not necessarily. This, like leveraging your retirement, for example, has its place.
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I think we probably would probably disagree based on risk tolerance.
My house is like a safe spot.

If all your other investments fail, at least you still have a place to stay.
That's just the way I think of it.
 
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