Household net worth, mostly stocks, plunged
Household debt increased at the slowest pace since COVID.
June 17, 2025
Household net worth declined $1.6 trillion in the first quarter to a level of $169.3 trillion after reaching a record high of $170.9 trillion in the final quarter of last year.
Financial assets, namely stocks, mutual funds and pensions, accounted for the bulk of the decline in the first quarter. Equity asset values fell $1.5 trillion as the S&P 500 index lost 4.6%, mutual fund shares declined $289 billion and pension entitlements decreased $243 billion. Debt securities rose by a marginal $52 billion; a flight to safety toward Treasuries was notably lacking. Financial market volatility arising from tariff uncertainty led to selling of financial assets.
On the nonfinancial side, which is largely comprised of real estate, residential real estate values lost $202 billion, the third consecutive quarter for a loss. High mortgage rates and rising costs of homeownership have weighed on activity. The loss in the first quarter could have also reflected declining values due to the California wildfires.
Business borrowing grew faster during the first quarter. Nonfinancial business debt increased 4.8% on an annualized basis after rising 0.8% in the fourth quarter. That was the fastest pace of growth since the second quarter of 2022. Many businesses took preemptive action to build up inventories in the first quarter ahead of tariff announcements, which was outside the normal course of business and required debt financing to do so. Additional costs were borne by firms holding inventories in bonded warehouses.
Growth in household debt was considerably more muted, reflecting a somber outlook by consumers. While household debt increased 1.9% on an annualized basis, it was the weakest pace since the COVID recession. Delinquencies on debt have been rising for several years as households struggle to make timely payments in a still-elevated interest rate environment. Expectations for higher inflation, ongoing tariff uncertainty and concerns about the job market are making consumers think twice about taking on more debt.
Any relief from the Federal Reserve via lower interest rates will not happen until much later this year.
Ken Kim
KPMG Senior Economist
Bottom Line
The record run-up in household net worth throughout 2024 came to an end in the first quarter of 2025. The pronounced decline in equity market values in response to tariff uncertainty, combined with modest losses in residential real estate values, were the main reasons behind the drop in net worth. Our forecast for stagflation in the second half of this year is expected to restrain borrowing by both businesses and households. We expect any relief from the Federal Reserve via lower interest rates will not happen until much later this year, in December.
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