Household wealth in the U.S. jumped to a record in the first quarter, exceeding its pre-recession peak for the first time, bolstered by gains in the stock and housing markets that are helping Americans mend finances.
Net worth for households and non-profit groups increased by $3 trillion from January through March, or 4.5% from the previous three months, to $70.3 trillion, the Federal Reserve said today from Washington in its financial accounts report, previously known as the flow of funds survey.
Household wealth eclipsed its pre-recession level as gains in the stock and housing markets help Americans withstand an increase in the payroll tax this year. Lending rates kept low by the Federal Reserve, coupled with further gains in employment, may continue to repair balance sheets and support consumer spending that makes up about 70% of the economy.
“We’re still on track for another improvement in net worth in the second quarter,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut. “It is having a positive effect.”
Household net worth is $2.29 trillion above its pre- recession peak of $68.1 trillion reached in the third quarter of 2007. It was at $67.3 trillion in the last three months of 2012.
The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $2.1 trillion in the first quarter to $57.7 trillion, today’s Fed report showed.
Equity prices have built on those gains so far this quarter even as federal budget cuts weigh on economic growth and concern that Fed policy makers will scale back bond purchases have hurt the market in the last three weeks. The Standard & Poor’s 500 Index advanced 3% through June 5 since March 29, while the first quarter saw a 10% increase.
Stocks rose today, after the S&P 500 Index dropped to a one-month low yesterday. The gauge climbed 0.3% to 1,614.41 at 2:30 p.m. in New York.
Household real-estate assets climbed by $836.8 billion, according to today’s flow of funds data. Owners’ equity as a share of total household real-estate holdings increased to 49.2% last quarter from 46.7% in the previous three months.
A recovering housing market is helping to support those gains. Property values rose 10.5% in the 12 months through March, the biggest gain in seven years and the 13th consecutive advance in national home prices, according to Irvine, California-based CoreLogic Inc.