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Financial State of Americans: Too Much Debt.Navigation: Main page Author: Johnson, Bradley Section: Media Planner
Home Ownership Near All-Time High, but Consumers Living Beyond Their Income It's the day of reckoning for taxpayers and not a bad time to assess the state of finances for the average American family. How are consumers doing? It's a mixed picture. Consumer income has barely budged in this economic recovery, and savings have dwindled. Home ownership has soared along with housing prices, but so has debt. The average family isn't getting rich: Median net worth (assets minus debt) from the recession year of 2001 through 2004 rose just 1.5 percent to $93,100, according to the Federal Reserve Board's comprehensive new Survey of Consumer Finances. But a review of personal-finance findings from the Fed and other sources also shows that consumers are investing in their future. Half of U.S. households own stock; seven in 10 families own their home. Following is a look at the state of consumer finance. Americans officially have been living beyond their income for one year. The nation's personal-saving rate-income minus consumption and interest payments-turned negative in April 2005 for the first time since 1933, according to the Bureau of Economic Analysis. The Fed survey found 56 percent of families are setting aside savings. It also asked consumers how long they typically plan for key saving and buying decisions. The richer households are, the longer the planning period. Families in the bottom 50 percentiles of wealth live in the short term: 45 percent of those families plan key money decisions a few months to a year out. Among the top 10 percentiles, more than 60 percent plan saving and consumption decisions at least five years out. Consumers can live beyond their income for a time by drawing on savings and capital gains and by borrowing. Many are extracting cash from the house, taking out gains after a sale or borrowing on equity. A cooling housing market means less easy money. One indicator of a peak: Census Bureau data show the percentage of households that owned homes reached an all-time record of 69.2 percent in late 2004. The decline since then has been small; 69 percent of families owned a home in late 2005. But lack of growth (after 10 consecutive years of growth) suggests a limit to the percentage of households that want to or can buy a home at current prices. Just under half of households (48 percent) had a home loan in 2004; 46 percent owed on credit cards or on installment loans such as car loans. About one-fourth of U.S. households (24 percent) were debt-free. In 1962 just 18 percent of families owned stock, according to the Fed. In 1983-21 years later-19 percent had stock or stock mutual funds. Advance 21 years to 2004, and half of households (49 percent) had money in the market. What happened? A bull market, for one. The Dow added 300 points from 1962 to 1983-and 9,000 from 1983 to 2004. The other key driver was the advent of employer-sponsored retirement plans such as 401(k)s. Nearly half of today's investors began by buying stock funds through such plans. Stock-market values halved from 2000 to 2002, but since have come roaring back. What's remarkable is how inactive investors were during this roller coaster ride. In 1998, on the way up, 42 percent of stock or fund investors bought or sold shares, according to the Investment Company Institute and Securities Industry Association. In 2001, on the way down, and in 2004, on the way back up, 40 percent did some buying or selling. DIVIDING THE WEALTHPercentage of various assets and debts held by families from poor to super-rich in 2004. The top 10 percent owned nearly two-thirds of all household assets.
Legend for Chart:
B - Net worth percentiles for households All families ($ billion)
C - Net worth percentiles for households Bottom 90% 0-50
D - Net worth percentiles for households Bottom 90% 50-90
E - Net worth percentiles for households 90-95
F - Net worth percentiles for households Top 10% 95-99
G - Net worth percentiles for households 99-100
A B C D
E F G
All household assets 59,109 5.8 31.0
11.4 22.2 29.5
Stocks, stock funds(1) 10,002 1.2 20.0
13.2 28.8 36.8
Private company equity(2) 9,841 0.3 9.2
5.7 22.4 62.3
Retirement accounts(3) 6,752 3.4 38.3
19.6 25.2 13.6
Checking and savings(4) 2,780 5.4 33.3
11.2 27.0 23.1
Bonds 1,115 0.1 2.9
3.1 23.7 70.2
Houses 19,110 11.7 50.1
11.9 16.4 9.9
Vehicles 1,945 26.8 49.8
7.9 9.6 5.8
All household debt 8,858 24.2 48.6
8.3 11.5 7.3
Mortgage, home-equity debt $6,660 22.8 53.5
8.9 10.0 4.9
Car loans, other installment debt $971 46.2 39.3
2.8 4.5 7.2
Credit card debt 266 45.7 46.9
3.6 3.1 0.7
Net worth 50,251 2.5 28
12.0 24.1 33.4
2003 income 7,930 23.8 40.0
8.5 14.1 13.6
Numbers rounded. (1.) Total value of stock held directly and
through mutual funds, retirement accounts, trusts and managed
accounts. (2.) Net equity in closely held businesses. (3.) IRAs,
401(k)s and similar. (4.) Checking, savings, money market and
call accounts.
Source: Analysis of Federal Reserve Board's Survey of Consumer
Finances by Fed economist Arthur B. Kennickell
THE AVERAGE AMERICAN FAMILYWhat families owned and owned in 2004
Legend for Chart:
B - Percentage of families who own …
C - … Median value of those assets
D - Percent change since 2001
A B C D
Stocks(1) 49 $24,300 -34
Home 69 $160,000 +22
Vehicles 86 $14,600 -1
Legend for Chart:
B - Percentage of families who owe …
C - … And their median debt
D - Percent change since 2001
A B C D
Home loans(2) 48 $95,000 +27
Car and other 46 $11,500 +12
installment loans
Credit card debt 46 $2,200 +10
Any debt 76 $55,300 +34
2001 numbers adjusted for inflation. (1.) Includes mutual
funds and equity holdings in retirement accounts. (2.)
Includes home equity loans.
Source: Federal Reserve Board's 2004 Survey of Consumer
Finances; chart information courtesy of Advertising Age
THE SUPER-RICHThe top 1 percent of families held one-third of the wealth in 2004. Their piece of the pie grew by 3.3 points from 1989 to 2004; the bottom 95 percent lost 3.5 points Net worth split among families by percentiles of wealth 0-50 2.5% 50-90 28% 90-95 12% 95-99 24.1% 99-100 33.4% Percentage change in net worth by household percentile, 1989 vs. 2004 0-50 -.5 50-90 -2 90-95 -1 95-99 N/C 99-100 +3.3 Total net worth for all families in 2004 was $50.3 trillion. Source: Analysis of Federal Reserve Board's Survey of Consumer Finances by Fed economist Arthur B. Kennickell ~~~~~~~~ By Bradley Johnson, Advertising Age in the Fair Use guidelines of the 1976 U.S. Copyright Act. info [at] singlearticles.com Powered by CommonSense |
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