Household Net Worth Tumbles By $3.7 Trillion, First Drop In 4 Years

In the Fed's latest Flow of Funds report released at noon today, the Fed published the latest snapshot of the US "household" sector as of Dec 31, 2018. What it revealed is that with $120.4 trillion in assets and a modest $16.1 trillion in liabilities, the net worth of US households dipped to $104.3 trillion, its first drop after 12 consecutive quarters of increases, and down $3.7 trillion as a result of the near-bear market in the fourth quarter, which wiped out estimated $4 trillion in various financial assets like corporate equities, mutual and pension funds, and deposits after the market tumbled in Q4, offset by a $345 billion increase in tangible assets, of which $280 billion was in real estate values.

Total household assets in Q4 dropped 3.7 trillion to $120.4 trillion, the first drop since Q3 2015, while at the same time total liabilities, i.e., household borrowings, rose by $133 billion from $15.9 trillion to $16.1 trillion, the bulk of which was $10.3 trillion in home mortgages. Homeowners’ real estate holdings minus the change in mortgage debt rose by $223 billion (a positive number means that the value of real estate is growing at a faster pace than household mortgage debt).

The breakdown of the total household balance sheet as of Q4 is shown below.

(Click on image to enlarge)

And here is the historical change of the US household balance sheet: it shows the first drop in household net worth in nearly four years.

(Click on image to enlarge)

And since the bulk of net worth is held by a tiny fraction of US households, just like on the way up it was roughly 1% of Americans who benefited from the near doubling in net worth from $58.9 trillion after the financial crisis to $108.1 trillion as of Q3 2018 when the S&P hit an all time high, so the drop in the last quarter only truly affected a sliver of the population, since most of America's assets are held in financial market derivatives.

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