Americans' net worth took a dive in the first quarter
3:27 PM, June 5, 2008
Yes, you have gotten poorer. And at an accelerated pace.

The net worth of U.S. households fell in the first quarter, the second straight decline, thanks to the double-whammy of sliding home values and the plunge in stock prices, the Federal Reserve said in a report today.

The central bank’s so-called flow of funds report estimated the net worth of American households at $55.97 trillion as of March 31, down $1.7 trillion from year-end. That was more than three times the $530-billion drop in the fourth quarter.

Home values fell by $329 billion in the first quarter after a $196-billion drop in the fourth quarter.

But it was the slump in stocks that really hammered Americans’ net worth: The value of their stock accounts and mutual funds sank by $956 billion in the first quarter, after a $598-billion decline in the previous quarter. (The market has recovered quite a bit since, of course.)

Still, at least by the Fed’s estimation, Americans’ overall balance sheet remains quite healthy. Net worth, remember, is assets minus liabilities. Households’ assets, at $70.46 trillion, dwarf their liabilities of $14.49 trillion, which mainly consist of mortgage and consumer debt.

What the totals don't show, however, is how net worth is distributed. A huge chunk of it is in the hands of the wealthiest people. Down the income chain there have to be plenty of people with negative net worth, especially in light of the housing bust.

Some minor encouraging news in the Fed’s report: Households continued to build up cash savings, which reached $7.59 trillion at the end of March, up from $7.08 trillion at the end of the third quarter.

On the other hand, as every saver knows, you’re earning next-to-nothing on cash accounts now, thanks to the Fed’s interest-rate cuts.

/see: http://latimesblogs.latimes.com/money_co/2...ou-have-go.html

why is this off topic?

some people have ego problems

Yes, and it does get a bit tiring sometimes.

Possibly because it was a duplicate post? http://www.housepricecrash.co.uk/forum/ind...30&start=30

I'd missed that one. I doubt it.

that was a post within another thread

this was a new thread

past caring

but there are some muppets about

"Falling Home Prices, Rising Oil : We're Getting Poorer, US wealth falling fast- Falls coming to the UK too"

In an inflationary environment with falling house prices, my plan is to stay 100% in cash until the right house and the right price comes up. (2 years for the bulk of the house price drops?).

I'm aware the cash buys me less and less oil, electricity, water and household goods as time goes by but it's difficult to buy much of that in advance. The savings in delaying a house purchase outweighs the losses due to inflation.

e.g. If house prices drop 10% per year, I save £50K per year. If fuel/goods inflation is 20%, that's costing me a few £K at most.

You are right that net worth is heading down in the US and coming to the UK but for many HPC posters (FTB/STR), the housing savings will outweigh the inflation effect.

VMR.

I share your hopes for the future to pan out favourably but have no faith in our politicians to manage the economy or our security or frankly anything else.

I also remember the late 70's early eighties - when inflation was rampant. The then government caved in to a wage rise spiral - which devalued the £ - eventually in 1985 down to parity with the US dollar - wreaking havoc with personal savings. Prices rose - including property.

Of course it was a wonderful time to be a houseowner and hold a massive mortgage as the debt was wiped out in no time. In fact being in debt (spending it early!) was the best way to extract the maximum value out of the weakening pound.

This time the B of E seem firmly opposed to inflation - but the unions have started sabre rattling - and the government will I fear cave in eventually. If this happens again - sooner or later inflation will reverse the falls in house prices as they become 'affordable' again with lots of devalued pounds paid in wages. However - if you were able to switch pounds to euros some time ago then there would be some buffer.

Me. too.
Which is why I am posting less and less here, I suppose

I hope not DrBubb...it was reading your posts that prompted me to join this forum....I had been whistling in the wind for the past few years telling family and friends that this house price bubble was going to end in tears...I even accepted an offer on my house last summer, because I recognized the same buy,buy,buy frenzy as I witnessed in the late eighties,the only thing I could think of doing was moving into a caravan and investing my equity.I didn't go through with the sale....guess I didn't have the courage of my own convictions.It's good to read the views of people like yourself BEFORE the event happens as in your thread..."The perfect storm".Which seemed to be a prophetic warning of the current world financial crisis.I'd be interested to know what your view is on how we can best insulate ourselves from this inflationary scenario we seem to be in.I have a feeling you may be of the view that gold is the best protection against it...but I still have a lot of reading to do here...So forgive me if you have already addressed that question.