U.S. Household wealth reached a new high in the first quarter of the year, mostly from a jump in home values and stock portfolios.
Net worth for households and non-profit groups increased by $1.49 trillion from January through March 2014, or 1.9 percent from the previous three months, to $81.8 trillion, the Federal Reserve said today in its “flow of funds” report.
But much of the nation’s rising wealth belongs disproportionately to the wealthy. That’s because they’re likelier to own stocks. The U.S. stock market rose again in the first quarter, with the broad S&P 500-stock index increasing more than 1 percent after a 30 percent gain last year.
Real-estate values are also key factors in household wealth. The value of stocks and mutual funds owned by households rose $361 billion last quarter, while the value of residential real estate grew more than twice that, to about $758 billion, according to the Fed.
Economists see surging household balance sheets as a boost to an economy that has been inconsistent this year, especially after an unusually harsh winter slowed growth.
Recent data on trade and the housing market have raised doubts about just how strong the economic recovery is. In the first quarter, the economy contracted at an annual pace of 1%.
“The deleveraging on the consumer front has largely run its course, and we’ve obviously been helped by the run-up in financial assets,” Omair Sharif, a U.S. economist at RBS Securities, told Bloomberg. “Balance sheets have been improving pretty substantially over the last few years.”