By Tim Mullaney
The median U.S. household lost nearly 39% of its wealth from 2007 to 2010, the Federal Reserve said Monday, emphasizing anew the impact of the financial crisis and the recession on ordinary Americans. Middle-class families took the biggest hit to their net worth during the crunch because much of their wealth was in their homes, whose values plunged during the recession and in its aftermath, the Fed report said. Wealthier families saw a smaller drop in their incomes, but nowhere near as much impact on their net worth.
Median incomes among the richest 10% of Americans fell 5.3%, compared with 7.7% for all Americans. The median net worth of the wealthiest 10% actually rose. The median is the point where half are above and half below.
Overall, median household net worth slid to 1992 levels after adjusting for inflation, wiping out the gains of the late-1990s Internet boom and the post-2000 housing surge, the Fed said.
The impact a given family felt varied depending on where they live, how much they earn and what kind of investments they had, said Scott Hoyt, an economist at Moody's Analytics.
"Richer people owned more bonds that didn't get killed," Hoyt said. "For middle-income households, their primary asset is their house, and the government stimulus backstopped incomes at the low end."
The median family's net worth dropped to $77,300 from $126,400 in 2007, the Fed said. The wealthiest 10% of families saw their median net worth rise 1.9% to $1.17 million.
Household net worth peaked at $66 trillion before the recession hit in December 2007 and fell to $54 trillion in 2008, according to the Fed. It was $63 trillion in the first quarter this year, but that doesn't reflect the stock market's fall since.
The Fed estimates Americans lost $7 trillion in home equity due to a housing bust that followed a surge in mortgage defaults after 2006.
Movements in the housing and stock markets suggest that middle-class households probably have not regained much of their lost ground since 2010.
The Standard & Poor's 500-stock index is up 4.1% since the end of that year. Housing prices have kept declining, falling 1.9% in the 12 months ended in March, according to the S&P/Case-Shiller composite index.
As recently as April, median household incomes, adjusted for inflation, were still 5.9% lower than in June 2009, when the recession ended, according to Sentier Research, and 8.3% lower than in late 2007.
Incomes improved in late 2011 but have begun sliding again this year, said Gordon Green, co-founder of Sentier.
The decline is larger and more persistent than in the recovery from the recession after 2000, when family incomes were restored within 18 months, Green said.
"Incomes went down more during two years of this recovery than during the recession itself," he said. "I don't think we've seen anything like this."