Americans' wealth sinks $1.3 trillion

June 12, 2009|Associated Press

WASHINGTON - The brute force of the recession earlier this year turned back the clock on Americans' personal wealth to 2004 and wiped out a staggering $1.3 trillion as home values shrank and investments withered.

Net worth, or the value of assets such as homes, checking accounts, and investments minus debts like mortgages and credit cards, declined 2.6 percent in the first three months of the year, the Federal Reserve said yesterday.

Those months were some of the worst of the recession so far for job losses, and the stock market sank to its lowest point of the year in March. Since then, some signs suggest the economy is stabilizing.

Still, partly because of the carnage earlier in the recession, Americans are putting plans on hold until the economy improves.

B. Smith, a conductor for a Chicago commuter rail line, is waiting to buy cars for two of his children. He spent $260,000 to build his suburban Chicago home about 10 years ago and watched its value spike to $380,000 in January 2008. Today, it stands at about $310,000. "I'm still ahead, but I'm not as ahead as I was before," he said.

Americans' personal savings rate zoomed to 5.7 percent in April, the highest since 1995. And the amount in savings - $620.2 billion - was the most on record dating to January 1959.

According to the Fed report, the biggest damage to wealth in the first quarter came from the sinking stock market. The value of Americans' stock holdings dropped almost 6 percent from the final quarter of last year - in a market that was already brutal.

Another hit to household net worth in the first quarter came from falling house prices. The value of real estate holdings fell 2.4 percent, according to the Fed report.

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