WASHINGTON -- After growing rapidly during the boom of the 1990s, the net worth of the typical American family rose only 1.5% after inflation between 2001 and 2004, the Federal Reserve said in an update of a survey it does once every three years.
The Fed said the net worth of the median American family -- the one smack in the statistical middle -- was $93,100 in 2004. Net worth, the difference between a family's assets and liabilities, rose a robust 10.3% between 1998 and 2001 and 17.4% in the three-year interval before that.
A booming housing market boosted the typical American family's wealth between 2001 and 2004, but stagnant stock prices and rising debt offset many of those gains.
The report, the most comprehensive survey of household wealth, also found a widening of the gap between households at the top and the bottom of the economic ladder. "While the typical American household basically ran in place, less affluent households actually lost ground," said Stephen Brobeck, executive director of the Consumer Federation of America.
The net worth of the typical family in the richest 10% rose to $831,600, a 6.5% increase from 2001, adjusted for inflation. In contrast, the net worth of the typical family in the bottom 25% fell 1.5% to $13,300.
Between 2001 and 2004, as the economy pulled out of a recession, home prices rose significantly. In its survey, the Fed said the median price of a primary residence rose 22.1%, adjusted for inflation, to $160,000 in 2004. The typical homeowning family had $95,000 in mortgage debt on its house.
During the same period, income for the median family rose only 1.6% after inflation to $43,200, a considerably smaller gain than in previous years. "The U.S. family became a family that's income poor but asset rich," said Matthew Smith, vice president of Smith Affiliated Capital, an investment firm in New York. "It all focuses around the housing market." The significance of real estate to the wealth of American families has spurred concerns that a slowdown, or even decline, in home prices could restrain consumer spending.
The stock market was not a big plus for the typical American family in the early part of this decade -- in contrast with the late 1990s -- and the share of families owning stock or mutual funds, including retirement plans, declined to 48.6% in 2004 from a peak of 51.9% in 2001. And among those families owning stock, the value of the median portfolio fell to $24,300 from $36,700 in 2001, adjusted for inflation.
Meanwhile, the typical family took on more debt. After declining for years, mortgage and other debt as a percentage of total family assets rose to 15% in 2004 from 12.1%, the Fed said. "The largest part of that increase was attributable to debt secured by real estate," the report said. "As debt rose over the period, families devoted more of their incomes to servicing their debts, despite a general decline in interest rates."
Some racial disparities narrowed, the Fed noted. The percentage increase in the net worth of the median nonwhite family was three times as large as it was for a white family between 2001 and 2004. Still, the median white family's net worth, at $140,700, compared with $24,800 for the typical nonwhite family.
The survey also found that 56.1% of all families said they saved in 2004, down from 59.2% three years earlier.
The Fed survey is based on interviews, averaging 80 minutes but sometimes stretching beyond two hours, of 4,522 American families.
what is net worth ? is this the cash & assets all you have ?