(Reuters) – U.S. household wealth fell by $400 billion in the third quarter, as U.S. stock prices fell more than Rise in property values.
Household net worth fell from $143 to $143 at the end of September. The Fed’s quarterly snapshot of the national balance sheet at $3 trillion showed it at $.7 trillion at the end of June. It was the third consecutive quarter of decline in household wealth.
During this period, an index covering 95% of the U.S. stock market capitalization rallied amid concerns about persistently high inflation and the Federal Reserve’s aggressive interest rate hikes in an attempt to Subdue it and lose nearly $2 trillion in value.
US central bank raises rates to 3.
-3.19% from 1.134 -1.50% from June to September.
Meanwhile, the pace of housing price increases has slowed, with the rate-sensitive housing sector bearing the brunt of aggressive moves by the U.S. central bank to curb demand across the economy.
The report also showed that household cash reserves — measured as the sum of checking accounts, savings and term deposits, and money market fund balances — were little changed in the third quarter, at nearly $4 trillion. This is down approximately 95 billion from the first quarter peak.
Consumer checking account and money market balances both rose, but savings and time deposits fell.
The Fed is relying on consumers to pull back on spending to help bring inflation down. American households have lost nearly $7 trillion in net worth this year, almost entirely due to the downturn in the stock market400.
But this is after household wealth jumped to a record $400.$1 trillion late last year due to COVID- Pandemic.
Household savings that were higher than usual have started to wane, but are still higher than pandemic norms.
US wallets are underpinned by three asset groups that have found their feet this year: Cash – Broad employment gains led by record checking deposits ; real estate — home prices themselves have yet to show material weakness even as the Fed raises rates; and consumer durables — reflecting rising values of big-ticket items such as motor vehicles and appliances due to inflation.
Total non-financial debt rose at a 4.9% annualized rate in the second quarter after growing at a 6.5% pace in 2018, Fed data also showed. The annual increase in household debt slowed to 6.3% from 7.4% in April-June, while growth in corporate and federal government debt also slowed. State and local government debt contracted in the third quarter.