American household wealth surges to new record--Fed
Thu Mar 10, 2005 01:05 PM ET
By Laura MacInnis
WASHINGTON, March 10 (Reuters) - Rising real estate prices and a resurgent U.S. stock market pushed the net wealth of American households to a record $48.53 trillion in the fourth quarter of 2004, the Federal Reserve said on Thursday.
In its quarterly "Flow of Funds" report, the central bank said household balance sheet values rose nearly $2 trillion above $46.59 trillion in the third quarter. U.S. household net worth pierced a new record in each of 2004's four quarters.
Higher values for real estate, equities and mutual funds led the fourth quarter net worth jump, the Fed said. Pension fund reserves and Treasury securities also posted big gains.
Residential real estate prices, boosted by historically low mortgage loan costs, continued to rise in the fourth quarter to $17.165 trillion and contributed to the gain in wealth.
Household balance sheets also benefited from buoyant stock markets in the period. The S&P 500 index gained nearly 8.7 percent, the Dow Jones Industrial index rose 7.7 percent and the Nasdaq was up 14.7 percent in the fourth quarter, Reuters data showed.
Net worth figures are not adjusted for seasonal factors.
Elsewhere in the report, the Fed said borrowing outside the financial sector rose at a seasonally adjusted 8.3 percent annual rate in the fourth quarter, the same rate as in the prior three months. Third quarter non-financial debt was first reported growing a weaker 7.4 percent rate.
For 2004 as a whole, the Fed said debt incurred by households, non-financial businesses and the federal and local governments rose 8.5 percent compared with 8.0 percent in 2003.
The total level of U.S. non-financial debt outstanding at the end of 2004 was $24.2 trillion, the Fed said, of which government debt made up $4.4 trillion.
Household debt grew 9.4 percent in the fourth quarter after a 11.5 percent expansion in the earlier period. The Fed said the quarterly deceleration reflected slower growth in mortgage debt and consumer credit.
Household debt increased 11 percent for 2004 as a whole, compared with a 10 percent gain in 2003, the Fed said. It attributed the 2004 pickup to higher demand for mortgage debt, as well as a slight rise in consumer credit. (Additional reporting by Michael Flaherty in New York)