U.S. Household Net Worth Hit Record High in Third Quarter

Surging values of stock portfolios and real estate holdings pushed the net worth of U.S. households to a record high in the third quarter, a report from the Federal Reserve showed Thursday.

Household net worth rose 3.2 percent in the third quarter from the second quarter to $123.52 trillion.

Household net worth is calculated by subtracting liabilities—such as mortgage debt and consumer debt—from assets such as bank accounts, stock holdings, and real estate.

The value of stock portfolios owned by U.S. households rose by $2.8 trillion while the value of real estate increased about $430 billion.  Household debt rose 5.6 percent to $16.4 trillion, its fastest pace in two years, as Americans piled on mortgage debt in a home-buying spree.

The report helps explain how consumer spending and home buying has remained strong despite mass unemployment. American households that own stocks and houses have become wealthier even as many workers have lost their jobs and some service sector businesses have seen sales under pressure from lockdowns and social distancing. A separate report released by the Labor Department Thursday showed over 19 million Americans were collecting some form of unemployment benefits or relief.

The U.S. economy has restored just 12 million of the 22 million jobs lost as the coronavirus took hold and much of the economy went into lockdown. Extended unemployment benefits for many long-term unemployed workers will begin to expire at the end of the year.

Business debt fell by more than $38 billion to a total outstanding $17.5 trillion, a 0.9 percent annualized rate of decline. It marked the first decline since the end of 2010 and likely indicates a hesitancy on the part of many businesses to take on debt to expand operations while state and local governments were considering new lockdowns to fight the pandemic.

Consumer credit excluding mortgage debt rose by almost $20 billion in the third quarter, likely also a source of strength for consumer spending. In the second quarter, consumer credit ex-mortgages had fallen for the first time since 2015.

Federal debt outstanding rose about $511 billion, or an annualized 9.1 percent gain, to almost $23 trillion. Total household sector assets were just over $140.3 trillion.