American Lost 40% of Their Wealth in 3 Years

[NickTheCage]

Americans saw wealth plummet 40*percent from 2007 to 2010, Federal Reserve says - The Washington Post

The recent recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with *middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.

[seand]

If you 40% of your wealth was in your house and your houses price was falsely overinflated, did you ever really have that wealth? Its sort of a "if a tree falls in the forest" question.

[jdhill]

If you 40% of your wealth was in your house and your houses price was falsely overinflated, did you ever really have that wealth?

of course you did if you bought the house at a price above its value today. Ex: Let's say you bought a house in 2008 for 400K and put 80K down. Instead of cash holdings of 80K, you then would have 80K in home equity, and your net worth is equal. Fast forward to 2012 when the house is worth 360K. Now you've only 40K in equity (plus whatever principle paid off in 4 years), so your net worth is down.

[seand]

Yes you can borrow against equity, but asides from those who did when they really should not have how often do people really? Honest question.

[jdhill]

you're really referring then more to the idea of liquid net worth rather than absolute net worth. If someone's home dropped substantially in value but they've no intention of selling it in the near term, then they may feel no immediate impact of loss of net worth. But that doesn't mean that they are not more restricted from a financial sense. As examples, it will be more difficult to refinance a house or use the house for collateral for another purchase, such as a school loan for a child. It will be more difficult to sell if a relocation is needed. It could even make downsizing to a cheaper property more difficult. But for a large number of people who retained huge equity in homes, many of whom bought in before the run up, your position is on target.

[NickTheCage]

If you 40% of your wealth was in your house and your houses price was falsely overinflated, did you ever really have that wealth?

Yes that is a big part of it as most citizens of America have/had a large % of their net wealth tied in their homes and we all know what happened.

Also remember that many have more wealth in their pensions, 401K’s and regular investments which were hammered. I would wager that many Americans sold what was left in 08 – 09 and didn’t have the comeback when the mkt recovered in late 09 – 10. They went to ca$h plus we have many sitting on ca$h. With what the Federal reserve has done, these Americans are earning 0%. All this adds to the wealth destruction we are seeing.

Can someone explain to me why the federal reserve isn’t evil/immoral?

[Colin P. Varga]

But at the same time 10% of the people are doing better.

[StatesRights]

A friend lost $40,000.00 + when he sold his home last year. Only consolation was that they bought another home which depreciated similarly, though not as significantly. Greater Northeast Philly values tumbled alot...

[torts]

If they had listened to torts, their net would have gone up 500%.

[torts]

[torts]

[torts]

The "Concerned Citizens of Point Breeze" will help us out with this one.

[Colin P. Varga]

But at the same time 10% of the people are doing better.

I meant the TOP 10% are doing better.

Families in the top 10% of income actually saw their net worth increase over the period, rising from a median of $1.17 million in 2007 to $1.19 million in 2010.

Family net worth plummets 40% - Jun. 11, 2012

[Litter Box]

Here is an old graph of housing cost over the last 100 or so years. If you bought in the latter years of President Bush 43 you would have lost the most in real money, people who bought earlier would have lost paper gains as the price is trying to find the real market value. An almost 90% rise in home prices was unprecedented.