U.S. Household Net Worth Shrinks $1.33 Trillion In Q1

June 11, 2009 2:20 p.m. EST

Washington, D.C. (AHN) - U.S. households saw $1.33 trillion of their wealth disappear in the first quarter of 2009 as the current recession continued to drag down the value of homes and investments.

The Federal Reserve reported that new worth for U.S. households fell to $50.38 trillion in the first quarter. That marks the lowest level since late 2004.

The first quarter total represents a 2.6 percent decline compared to the fourth quarter of 2008.

A majority of the first quarter loss was due to the declining stock markets. U.S. households saw a 5.8 percent drop in total value of their stock holding during the quarter.

However, after an ugly first quarter the U.S. stock markets have rebounded off the 12-year loss, rallying more than 30 percent well into the second quarter.

The continued fall in home values also cut into total net worth. U.S. household real estate holding fell 2.4 percent in the first quarter.

At the end of the quarter, homeowners had about 41.4 percent of equity in their homes, the lowest on record dating back to 1945.

That statistic is a product of the housing market boom and bust. Homeowners who were taking out loans against their homes when values were on the upward climb to finance the purchase of other large-ticket items now find themselves owing more than the home is now worth, due to the rapid price declines.

Home prices are down about 32 percent since the market peak in the second quarter of 2006, according to the Case-Shiller national home price index.

U.S household net worth is the collected value of assets such as homes and bank accounts, less liabilities such as credit card debt and mortgages.