Fed report on Americans’ net worth is a painful read

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Despite the many challenges the nation’s economy has faced over the last two decades, optimists could always point to the huge net worth of U.S. consumers, as tracked by a report published quarterly by the Federal Reserve.

Now, that same measure of Americans’ wealth is in a steep decline.

The latest Fed report, with data as of Sept. 30, was published Thursday. It showed that the value of U.S. households’ net worth -- the amount by which their assets exceeded debts -- tumbled $2.81 trillion in the quarter, or 4.7%, to $56.5 trillion.

That’s still a big number, of course. But it now has fallen 11.1% from a record high of $63.63 trillion in September 2007. That is the largest year-over-year drop since record-keeping began in 1952, according to Bloomberg News.

Even as consumers reduced their total debt level in the quarter by an 0.8% annualized rate, seasonally adjusted -- the first such decline in debt since at least 1952 -- the value of their assets fell much faster, with the housing market and the stock market both in rapid retreat:

--- The value of households’ stock holdings and mutual funds was $11.46 trillion as of Sept. 30, down 11.8% in the quarter and 23.9% from a year earlier. And that was before the stock market really fell off the cliff in October and November.

--- Pension fund reserves declined to $11.51 trillion, down 5% for the quarter and 12.5% year-over-year.

--- Consumers’ real estate assets were valued at $19.10 trillion at the end of the quarter, down 2.8% in the quarter and 9.8% from a year earlier.

The bitterest pill of all, for many people: After subtracting mortgage debt on real estate, consumers’ net equity in their homes shrank to $8.53 trillion as of Sept. 30, down 5.7% in the quarter and 20.8% year-over-year.

Since the boom year of 2005, when Americans’ home equity reached a high of $12.49 trillion, that store of wealth has plunged by nearly one-third.

The Fed’s report just backs up what we all feel, and why consumer spending has plummeted: Our national wealth is eroding faster than it ever has before in the modern era.

-- Tom Petruno