Household net worth is expanding

September 12, 2023

Household net worth climbed to a new record level, pushed higher by a rising stock market and appreciating home values. Household net worth increased by 1.7%, or $2.8 trillion, to $163.8 trillion in the second quarter of 2024. Overall assets rose $2.9 trillion in the latest quarter, outpacing the 10-year growth average of $2.2 trillion, which was slightly offset by liabilities increasing $177 billion, in line with the long-term average.

Financial assets, namely stocks, bonds, mutual funds and pensions, rose $1.1 trillion, or up 0.9%, in the second quarter after rising 3.5% in the first quarter and 4.1% in the fourth quarter of last year. The value of equity assets neared $400 billion; debt securities increased $276 billion; mutual funds were up $113 billion, while pension assets rose $298 billion. The smaller gains compared to recent quarters were due to the more muted performance in the stock market. After climbing by double digits in the prior two quarters, the S&P 500 stock index rose 3.9% in the second quarter.

On the nonfinancial side, which largely comprises real estate, residential real estate values rose $1.8 trillion in the second quarter after rising $1.5 trillion in the first quarter. National home prices are currently up more than 6% on an annual basis in the first half of 2024. Home prices have been pushed up by a structural shortage of homes and the many current owners who have little incentive to move due to the low mortgage rates they locked in.

Business and household borrowing continued to expand in the second quarter, thanks to less strict lending standards by commercial banks. Nonfinancial business debt increased 3.8% on an annualized basis after rising four percent in the first quarter. In the Fed’s latest Senior Loan Officer Opinion Survey for the second quarter, eight percent of banks tightened their lending standards for commercial and industrial (C&I) loans to large and middle-market firms (e.g., businesses with annual revenue of $50 million or more). This is down notably from the 15-20% of banks that were imposing tighter lending standards during the previous two quarters.

The same can be said for the consumer. Household debt rose 3.2% on an annualized basis in the second quarter after rising by 2.8% in the prior quarter. Banks have been relaxing their standards for consumers to the point that some loan categories revealed an actual easing of conditions for consumers, a marked change from the prevailing tight conditions that have been in place for roughly two years. Mortgage debt rose three percent while consumer debt increased 1.6% in the second quarter.