Family Net Worth Falls

According to the Federal Reserve, family net worth fell between 2001 and 2004. Housing bubble watchers and experts will find this interesting because house prices went up dramatically during the three year period. This of course leads to the question, where did all the equity go? It looks like the equity was borrowed against in the form of home equity lines. For example, if the value of the house increased from $500,000 to $800,000, the typical owner borrowed against the increase in value. Instead of having a $450,000 mortgage, the owner now has a $750,000 mortgage. The equity extraction must have bought a lot of granite counter tops,


“WASHINGTON -- Growth in U.S. family wealth slowed to a crawl from 2001 to 2004 and stock ownership fell, according to a Federal Reserve report released Thursday.

Median net worth, the difference between household assets and liabilities, rose 1.5 percent, to $93,100, down from a 10.3 percent gain from 1998 to 2001. Net worth fell for the bottom 40 percent of U.S. families, according to the survey of 4,000 households, which the Fed conducts every three years.”

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