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    Despite recovery, younger households are slower to make gains

    The total wealth of US households has recovered from the financial crisis and Great Recession, according to the Federal Reserve Board. But that recovery has not been enough to keep up with inflation, and many Americans, particularly younger adults who took on heavy debt to buy homes before the housing bubble collapsed, are lagging.

    The Fed said last week that household wealth rose by $3 trillion in the first quarter, to $70.3 trillion. It was the first time the total exceeded the $68.1 trillion posted in the third quarter of 2007, before the recession began, and was the largest quarterly increase since 1999, when the stock market was rising rapidly.

    In the first quarter, a third of the gain in wealth came directly from rising values of corporate stocks owned by households. That was a little more than the gain attributed to rising real estate values.


    The Federal Reserve Bank of St. Louis pointed out that there are more households now than there were in 2007, and that there has been inflation, as well. The average household wealth at the end of the quarter was $613,635. That is 11 percent below the peak of $689,996 (in 2013 dollars) set in the first quarter of 2007.

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    Those averages are deceptive, in that they are raised by the high wealth of a relatively small number of households. A very different picture emerges from looking at the median — the level at which half the households are richer and half poorer. That statistic can be calculated from the Fed’s triennial survey of consumer finances. In the studies conducted in the 1990s, the median net wealth was about one-quarter of the average. In the 2000s, the median fell to about one-fifth of the average, and in 2010, it was down to about one-sixth of the average.

    During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the St. Louis Fed, “exactly the people you would think need to act conservatively were doing the opposite.” Home-ownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.

    Emmons compiled average wealth figures for different groups from the triennial surveys, and estimated how they have changed since 2010. While all age groups have yet to recover to their 2007 wealth, older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. The decline is nearly 40 percent for the younger group.

    During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards.