The decline in household wealth during the recession was enormous. Almost $15 trillion dollars in household wealth was lost. How much of a comeback have people made? N.C. State University economist Mike Walden answers.
“This is really important. I think this is the most important facet of the economy — the fact that all this wealth was lost. It is really what is driving households to be very frugal and very modest in their spending.
“But every three months we get a new report on household wealth from the Federal Reserve. And we just got one, and we have some modest good news in that we’ve seen household wealth slowly increase over the last couple of years. We’ve now recovered one-third of that $15 trillion loss in wealth. So we’ve recovered $5 trillion. Most of that has been based on a rebound in financial assets. So, for example, people have noticed the stock market on trend is going up.
“However, real estate has not yet rebounded. So unfortunately for households who have more of their wealth in real estate, they have not enjoyed this rebound.
“So this is a number really to keep an eye on. The faster that household wealth comes back, I think, the faster the economy will come back. But some economists think this will take another three, four, five years to recover that $15 trillion. If that’s the case, we’re probably in for a slow economy over that time period.”