Changes in U.S. Family
Finances from 2007 to 2010: Median Net Worth Falls $49K
June 12, 2012
New
data shows the financial crisis drastically cut the wealth of households
across the United States, which contributed to the recession, slowed the
recovery, and hurt the middle class.
A report from the Federal Reserve says damage was done mostly by falling
home prices between 2007 and 2010.
The Chief Economist of the National Association of Realtors, Lawrence
Yun, says falling home prices make families less willing to spend money,
which cuts consumer demand and hurts economic growth.
“Decline
in home value has a major impact on the economy because for most
homeowners the largest wealth holding is in their housing. And
therefore, if the home values decline it makes the homeowners much more
conservative about their spending outlook. They go to the restaurant
less frequently, they do not buy furniture, and even the frivolous items
like the high-definition television will be cut back.”
The report says home prices helped cut the median net worth of families
from $126,000 to $77,000 over about three years.
Net worth is what is left after subtracting debts from the value of
homes, bank accounts and other assets. The median is right in the middle
between the poorest half of the population and the richest 50 percent.
Yun says there are signs the battered housing market is recovering and
improving.
Gail Cunningham of the National Foundation for Credit Counseling says
housing problems and worries about unemployment mean many families are
putting off all but essential purchases so they can pay down debt.
“You simply have to have confidence that you are going to have income
tomorrow before you make a commitment or even on your daily expenses.
People, they are worried about putting dinner on the table tonight. They
are worried about filling that gas tank up tomorrow. And without the
confidence that a paycheck is going to be coming in, people are very
reluctant to spend.”
Cunningham says families are slowly becoming more confident and
beginning to boost their spending, but she says many are nervous and
some are “hoarding” their money. She says many consumers have a poor
understanding of personal financial issues, and some have learned
painful lessons about borrowing too much money.
