U.S. Household Wealth Slumped in Fourth Quarter While Stocks Fell

(Bloomberg) -- U.S. household wealth dropped in the fourth quarter amid stock-market turmoil, while consumer debt rose at the slowest pace in more than a year amid weakness in housing, a Federal Reserve report showed Thursday.

Net worth for households and non-profit groups fell by $3.73 trillion, or 3.5 percent, to a one-year low of $104.3 trillion. Household debt rose at a 2.9 percent annual rate after 3.6 percent in the prior period, reflecting a slowdown in mortgages as home sales cooled, while growth in business debt cooled slightly to 3.8 percent.

Key Insights

• While the fourth-quarter plunge in U.S. stocks wiped out $5.41 trillion in market value, equities have rallied since late December, which will likely support a rebound in wealth. But sustaining gains may be more difficult this year amid a broad cooling in real estate.
• The value of equities directly and indirectly held by households and nonprofit groups fell $4.57 trillion during the quarter.
• Excluding mortgages, consumer debt rose at a 6.2 percent pace, faster than the prior quarter, as Americans continued to take advantage of relatively low interest rates and borrow for large purchases such as cars to fuel overall gains in spending. Total consumer debt rose to a record $15.6 trillion, as non-mortgage credit topped $4 trillion for the first time.

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• Companies had $4.05 trillion in liquid assets, which include cash, deposits, debt securities and stocks. That’s the lowest level in more than a year.
• Owners’ equity as a share of real-estate holdings edged up to 60.1 percent from 59.8 percent. This is the first time the ratio has exceeded 60 percent since mid-2002, based on previously released data. Home equity loans fell to $533.1 billion, extending a decade of declines.

--With assistance from Jordan Yadoo.

To contact the reporters on this story: Alex Tanzi in Washington at atanzi@bloomberg.net;Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editor responsible for this story: Scott Lanman at slanman@bloomberg.net

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