WASHINGTON—The net worth of U.S. households finished 2020 at the highest level on record, as soaring prices for stocks, real estate and other assets erased losses inflicted by the coronavirus pandemic and related economic downturn.
Household net worth—the difference between assets and liabilities—ended the fourth quarter at $130.2 trillion, the Federal Reserve said Thursday. That was up 5.6% from the third quarter and 10% from the end of 2019.
The gains came as financial assets—particularly corporate equities and mutual-fund shares—rose steadily after the first quarter of 2020, when markets suffered a sharp drop. The S&P 500 stock index rose 12% in the fourth quarter and 16% for the full year, propped up by extraordinary stimulus actions from Congress and the Fed.
Americans are also getting a financial boost from rising real-estate prices, with many refinancing mortgages at lower interest rates and taking out cash to pay debts or renovate their homes. The median existing-home price rose to about $310,000 in December, an increase of almost 13% from December 2019.
Rising net worth is contributing to an increasingly optimistic outlook for the economy’s recovery prospects this year, as household spending accounts for more than two-thirds of U.S. gross domestic product.
The nearly $1.9 trillion relief package that passed Congress on Wednesday is projected to help propel the economy to its fastest annual growth in nearly four decades. Analysts surveyed by The Wall Street Journal in recent days lifted their average forecast for 2021 economic growth to 5.95% from 4.87% a month earlier.
Household balance sheets have remained intact through the pandemic in large part because the federal government has stepped in with trillions of dollars of aid, including direct payments to households and enhanced unemployment benefits.
Thursday’s data don’t show how wealth is distributed across income levels—an important asterisk at a time when many economists say the gap between rich and poor is likely widening due to the pandemic’s outsize impact on low-wage workers, women and minorities.
Total debt in the household sector, which consists mostly of mortgages, rose 4% in 2020 to $16.64 trillion, compared with 3.2% growth in 2019. Consumer credit finished the year little changed, as some households used stimulus checks and jobless benefits to pay down debt.
Outstanding business debt, on the other hand, rose 9.1% last year to $17.7 trillion. And the federal government’s debt rose 24% to $23.621 trillion, according to Thursday’s report.
Write to Paul Kiernan at [email protected]
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
This post first appeared on wsj.com
