Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession?

Saturday, 4 July 2015: 10:15 AM-11:45 AM
TW2.1.04 (Tower Two)
Edward Wolff, New York University, New York, NY
I look at wealth trends from 1962 to 2013. Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2013. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010, almost double the drop in housing prices, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply from 2007 to 2010. Relative indebtedness expanded from 2007 to 2010, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average debt of the middle class fell by 25 percent in real terms. The sharp fall in median net worth and the rise in overall wealth inequality from 2007 to 2010 are traceable primarily to the high leverage of middle class families and the high share of homes in their portfolio. The racial and ethnic disparity in wealth holdings widened considerably in the years between 2007 and 2010. Hispanics, in particular, got hammered by the Great Recession in terms of net worth and net equity in their homes. Young households (under age 45) also got pummeled by the Great Recession, as their relative and absolute wealth declined sharply from 2007 to 2010. Rather remarkably, there was virtually no change in median (and mean) wealth from 2010 to 2013 despite the rebound in asset prices, presenting a new puzzle. The proximate cause was the high dissavings of the middle class. Relative indebtedness fell for the middle class as outstanding debt continued to drop. Wealth inequality and the racial and ethnic wealth gap also remained largely unchanged, though there was some recovery of the net worth of young households.