Americans Lost $544 Billion And Racked Up Debt Last Quarter As Stocks Collapsed And Housing Prices Spiked

Topline

Dragged down by the stock market’s worst quarter since the Covid-induced recession two years ago, the combined net worth of U.S. households tumbled by $544 billion in the first quarter, ending a streak of record highs as Americans face plunging equity valuations—and load up on debt.

Key Facts

Though up about 9% year over year, the net worth of households in the United States fell to about $149.3 trillion in the first quarter, marking the first quarterly decline since pandemic-induced lockdowns shuttered businesses in the first quarter of 2020, the Federal Reserve said in a report Thursday.

The Fed, which calculates net worths by subtracting overall debt held from the sum of assets like savings and equities, attributed part of the decline to the plunging value of stocks, which fell $3 trillion in the first quarter.

Meanwhile, “robust gains” in housing prices helped drive up real estate values by $1.6 trillion, but also fueled mortgage debt, which grew by an outsized 8.6% in the quarter.

Total household debt jumped 8.3% on an annual basis to $18.3 trillion last quarter—the fastest pace since the Great Recession, with rapid growth in credit card borrowing and automobile loans pushing consumer credit up 8.7%.

Key Background

The economic reopening in 2020 and massive fiscal stimulus helped fuel one of the strongest starts to a bull market ever—helping household net worth top $150 billion for the first time ever last quarter. However, now with the Federal Reserve raising rates and unwinding its economic support, stocks—and particularly those in technology—are struggling. The S&P 500 has dropped nearly 15% this year, while the tech-heavy Nasdaq has plunged 24%.

Tangent

Though housing prices are still rising, signs of a slowdown have emerged in the red-hot housing market as the Fed embarks on its most aggressive interest-rate-hiking cycle in two decades. Mortgage application rates plummeted to the lowest level in 22 years last week, as higher borrowing costs ward off potential homebuyers and hurt home sales.

Further Reading

Stocks Just Posted Worst Quarter Since Covid Market Crash (Forbes)

S&P 500 Briefly Plunges Into Bear Market As Stocks Fall For Seventh Week In A Row (Forbes)

How Does The Market Perform During An Economic Recession? You May Be Surprised (Forbes)