The first quarter figure on household wealth showed the seventh consecutive quarterly decline since the record high in the second quarter of 2007. The $1.3 trillion (yeah, Trillion) Q1 decline left a $14 trillion (22%) plunge since the peak in 2007. A primer on what the measure includes is in a March post as the size of the cumulative dive nearly equals the country's annual production (GDP).
The massive decline in household wealth over the last two years is behind the expectation that this recovery will lack a strong upturn in consumer spending. The slow rebuilding of wealth will foster the upturn in savings (already seen) at a cost to spending. However, the outlook includes what seems to be a turn in trend as we're likely to see a stock inspired rise in the current quarter wealth given the sharp equity price gains since the March lows.
Falling home prices have been a smaller negative contributor than financial assets but have been longer lasting for over two years. Home prices haven't bottomed out yet but their declines are slowing. New home prices have risen in three of the last six months while existing home prices have shown gains in each of the last three months. With some good news over the rest of the quarter even real estate holding may provide a small boost to wealth.
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