Family net worth falls by 40%

The Federal Reserve's new Survey of Consumer Finances -- an important and extremely detailed report issued every three years -- confirms what many American families already know: The Great Recession walloped the middle class.

This description of the report in The Washington Post is chilling:

Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Post continues below.

• Median net worth dropped from $126,400 in 2007 to $77,300 in 2010 (adjusted for inflation). "That puts Americans roughly on par with where they were in 1992," says the Post. 
• In that same time, median household income fell from $49,600 to $45,800.
• The damage to the middle class was worse than to people on either end of the income scale. The New York Times explains:

One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.

Among the report's other depressing stats:

• From Bloomberg: "The proportion of families with retirement accounts decreased 2.6 points to 50.4% during the period, wiping out much of the 3.1 percentage-point increase over the prior three years, the report said."
• The percentage of families adding to savings fell from 56.4% in 2007 to 52% three years later.

• In 2010, 19.2% of families had education debt, up from 15.2%. "Among families with education debt, the mean increased 14.0% (from $22,500 in 2007 to $25,600 in 2010), while the median rose 3.4% (from $12,600 in 2007 to $13,000 in 2010)," the report said.

"The Fed noted that education loans made up a larger share of the average family's obligations than loans to buy automobiles for the first time in the history of the survey," The New York Times said.

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Many families with credit cards do not carry a balance. Of the 68.0% of families with credit cards in 2010, only 55.1% had a balance at the time of the interview; in 2007, 72.9% had cards, and 61.0% of these families had an outstanding balance on them. The number of credit cards held by families also decreased. In 2007, 35.0% of families held four or more cards, and that level of ownership fell to 32.7% by 2010. Between 2007 and 2010, the fraction of families with three cards fell from 12.1% to 10.6%, the fraction with two cards fell from 12.7% to 12.2%, and the fraction with one card fell from 13.1% to 12.5%.

Does the content of the report match your life experience in those critical years? 

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