The net worth of American families has plunged 40 percent since 2007, right before the financial crisis struck, dipping to an average of $81,400 per household, according to a new report from the Pew Research Center. That’s down from $135,700 in 2007. Pew measures net worth as the difference between the values of a household’s assets, including homes, investments, and liabilities.
Where’s Wealth Going?
“The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families,” the report says.
The average weekly wage has mostly stayed stagnant in recent years: $853 last month compared to $833 in November 2013, according to the Bureau of Labor Statistics.
The drop in net worth is particularly acute along racial lines. The gap between blacks and whites has reached its highest point since 1989, with the wealth of white households 13 times greater than that of black households in 2013, according to Pew research. The median net worth of white households was $141,900 in 2013, dropping 26 percent since 2007; for Hispanic households, net worth in that time fell by 42 percent to $13,700, and for African-American households, it dropped 43 percent to $11,000.
The Pew report partially attributes the wealth gap among the races to the fact that white households are more likely to own stocks directly or indirectly through retirement accounts. Financial assets such as stocks have recovered value more quickly than housing since the recession ended, according to Pew.
However, the housing picture has improved and may help lift many household’s finances. Fewer borrowers are underwater, which means they no longer owe more on their mortgage than their home is worth. Eight percent of borrowers, or 4 million, were underwater in October compared to the peak of 35 percent, or 18 million homes, in February 2011, according to data from Black Knight Financial Services, which tracks mortgage performance.
Source: “Wealth Inequality has Widened Along Racial, Ethnic Lines Since End of Great Recession,” Pew Research Center (Dec. 12, 2014) and “Americans Are 40% Poorer Than Before the Recession,” MarketWatch (Dec. 13, 2014)