• Lisa Simpson
• Dec 21,2009
• In: Finance

It is Good News – the Net Worth of Americans has Gone up Once More

It is good news – Americans are once more inching upwards and their net worth has gone up. There have been stock gains and in house values. But it is most probably going to be a slow journey forward.

The net value comprising of assets in properties, bank balances and investments after deducting debts in mortgages and credit cards went up by 5% in the third quarter to touch $53.4 trillion according to the findings of the Federal Reserve. This was the second consecutive quarterly increase.
However the gains are far les than its peak of $64.5 trillion noted prior to the recession. This highlights the massive loss experienced over the previous two years. The net worth has to increase to an extra 21% to return to the heights of the pre-recession days.

Many pundits are not expecting a repeat of the strong gains made during the last two quarters in the near future. Scott Hoyt of Moody’s Economy.com feels that household wealth will not reach the peaks of the pre-recession days till around 2012. Hoyt commented “We’re clearly moving in the right direction, although we have questions about whether we can get there as quickly as we have in the past couple of quarters.”

It was investment in stocks that gave the biggest push to the net worth during the third quarter of the current year. Stock value jumped to $1.04 trillion calculating to 17% - a little less than the second quarter increase. The increase reflected the powerful showing in the market. The index of Standard&Poor 500 increased by 15%, during the third quarter of this year. It has marked a surge of 60% since last March.

But there are reservations in this optimism. Even if there is a 4% plus gain in the fourth quarter it will be 32% lower than the peak noted in October 2007. Two months after that the recession took off.

A net worth hit the bottom touching $48.5 trillion in the first quarter of the current year of 2009. This came after massive declines during the preceding three quarters – 5%, 10%  and 6% during the 3rd quarter of 2008, 4th quarter  2008 and 6% in the first quarter of 2009 respectively. In the forthcoming months the gain is expected to be slow in tune with the pace of the wider economic improvement. Credit is still tight and consumers continue to be shy about spending.