Families see net worth increase

Value of stocks, homes credited

— Household wealth in the U.S. climbed in the third quarter, reflecting increases in stock values and home prices that are helping raise consumer confidence.

Net worth for households and nonprofit groups increased by $1.72 trillion from July through September, or 2.7 percent from the previous three months, to $64.8 trillion, the Federal Reserve said Thursday in its flow-of-funds report.

A recovery in household wealth, which plunged in the wake of the recession, may put more Americans in the mood to spend during the Christmas shopping season and give the world’s largest economy a lift. Net worth is still below its prerecession peak, one reason the Federal Reserve is considering additional actions to spur expansion.

“Households have gotten themselves into much, much better financial shape,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The ability of consumers to weather a shock is higher because buying power has increased. There’s no question that rising home prices are really helping to under- pin buying power.”

The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $1.3 trillion in the third quarter, the Fed report showed.

More than $800 billion was added to U.S. equity values last quarter. The Standard & Poor’s 500 Index advanced 5.8 percent from July through September. The index has decreased since, falling 2.2 percent through Wednesday as investors waited to see whether lawmakers will resolve the spending cuts and tax increases in place for next year. The 500 Index was little changed Thursday as European Central Bank President Mario Draghi said weak activity is expected to continue.

Household real estate assets rose by $301 billion, according to the flow of funds data. Owners’ equity as a share of total household real-estate holdings climbed to 44.8 percent last quarter from 43.4 percent.

Multiple measures show U.S. home values are on the path toward recovery. Core-Logic Inc. said last month that single-family home prices climbed 7.6 percent in the third quarter from a year earlier. Home values in the third quarter increased 3.6 percent from the same period in 2011, the biggest gain in two years, according to S&P/Case-Shiller data.

Federal Reserve officials are weighing whether to expand record stimulus to increase wealth and promote economic growth. A “number” of central bankers said at their policy meeting in October that the Fed next year may need to expand its monthly purchases of bonds, according to the minutes of the Federal Open Market Committee’s Oct. 23-24 gathering.

Treasury purchases are “associated with increases in stock prices, which in turn can have wealth effects on consumption and investment,” Federal Reserve Gov. Jeremy Stein said during a Nov. 30 speech. The Fed meets again next week.

Business, Pages 27 on 12/07/2012

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