Americans’ Net Worth Drops 40%

For those looking for some type of perspective or measuring stick to truly gauge how well the country is faring, numbers released today should provide it in spades. The average American family’s net worth is down a devastating 40%.

According to numbers released by the Federal Reserve on Monday, the average net worth of the typical American family dropped 40% between 2007 and 2010. The media figure was $126,400 in 2007 and by 2010, that number fell to $77,300. That means the recession has resulted in a complete loss of almost twenty years (18 3/4 years, to be exact) of savings and investments so many families chad carefully accumulated.

Survey of Consumer Finances

Significant drops such as these haven’t happened since the early 1990s – and even then, the losses weren’t anywhere near 40%. The report provides a solid snapshot into how quickly the recession annihilated many family financial structures – and more importantly, it reveals how deep that annihilation went.

A sharp decline in housing values, says the report, played a role in how the numbers ultimately fell.

The Numbers

The median homeowner had a net worth of $246,000 in 2007. By 2010 – just thirty six months later – that number had fallen to $174,500. This equates to more than $70,000 in losses on average.

For those in the southern and western regions of the country, the losses were worse. These two regions also took massive hits in their respective housing markets, most notably, Florida, Nevada and California being especially bad.

Income Down

Another aspect of this report focuses on income averages around the country. Those numbers, within the same time period, fell 7.7%. Capital gains are now nearly non-existent. Folks are saving less, too. In 2007, 56% of us were able to put money back. By 2010, that number had fell to 52%. This too was a number not seen since 2010.

Disciplined Mindsets

Here’s one of the more interesting aspects of the government report. We’re paying more on our debt. The average credit card balance fell 16.1% and the share of families that carried debt as a hell decreased – albeit slightly – to slightly less than 75%. These numbers have many analysts wondering how it’s possible. After all, the job market is stagnant (and that’s putting it mildly, despite President Obama’s self-congratulatory message delivered earlier in June). May proved especially disappointing, though it’s not the first time the experts were wrong in their estimations in the American job market.

For those less disciplined in their personal budgeting efforts or those who were hit especially hard, they’re in a growing category. Despite lower interest rates, those consumers struggling most saw many of credit accounts fall into the “delinquent for 60 days or more” category. In 2007, 7.1% of folks were in that category. In 2010, that percentage was in the double digits at nearly 11%. It’s likely that number will be even higher in a year.

Finally, the report highlights another important consideration. Those families with more assets at the start of the recession were able to retain their financial worth easier than their less-affluent counterparts. Those in the top ten percent bracket were the only ones who saw any improvement at all. Their net worth, on average was $1.17 million. Three years later, that number increased to $1.19 million.

Once you figure in all of the other facets of the American economy, there’s no doubt we’ll likely find ourselves on the road to another recession. So how does this bode with other financial considerations?

On Tuesday, figures on import prices; Wednesday and Thursday are big days too as both producer and consumer prices will be released. The Producer Price Index, or PPI, provides insight into wholesale prices. Following this, the Consumer Price Index will be released, which should also provide significant insight into another aspect of the economy. Another report due this week provides information on what Americans are buying, aside from necessities. It’s not likely to improve anyone’s outlook, especially when contrasted against everything else.

Meanwhile, the incredible frustrations associated with a job market that hasn’t budged in three months has the Fed scrambling for ways to kick start economic growth. Many may recall the Fed stepped in three years ago in order to prevent a depression; unfortunately, while it did serve that purpose, it’s done little in terms of an overall effect.

With the fate of the healthcare bill now being reviewed on the Supreme Court level, a president who’s insisting everything’s fine only to backpedal, growing global concerns and a host of other dismal outlooks, it’s time for the politicians to re-prioritize and begin making real headway in efforts to prevent another recession.

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