Improving household balance sheets

The recession has had a dramatic impact on household wealth and debt. N.C. State University economist Mike Walden gives an update on where these important financial measures stand.

“The Federal Reserve gives us an update every quarter. We recently received a new update that was just out that includes the first quarter of this year 2012. Overall, the news is good. What we saw at the household level is that net worth — that is the difference between the value of what people own, their investments, and what they owe, their debt — was up, although it is still below where it was pre-recession.

“The value of financial assets has shown the most improvement. Now real-estate assets, which had been flat to actually trending downward, did … have a little bit of a rebound in the first quarter of 2012. That’s very, very key, because that’s going along with the notion that maybe there’s some improvement in the housing market.

“On the debt side, households continue to be frugal — total debt decline, although some kind of debt, like student debt, did go up.

“So, we’re moving in the right direction here, but because we’re still not back to pre-recessionary levels, there is still work to be done on the household financial balance sheet.”