By Caroline Dobson, Epoch Times | 20 September 2010
HOUSING WOES: A 'pre-foreclosure' sign is seen in front of a home on Sep 16 in Miami, Fla. Weak housing prices is a major reason behind last quarter's $1.5 trillion decline in U.S. household wealth. The recent housing bust has not only sent millions of Americans to the unemployment lines, but also devastated the net worth of untold more.
A recently released Federal Reserve report announced that average U.S. household net worth plummeted in the second quarter. The latest data shows a $1.5 trillion loss in combined household net worth (including non-profit groups) in the period, to $53.5 trillion. This is equivalent to a 2.8 percent fall in total wealth belonging to American consumers, net of debt owed.
The Washington-based Flow of Funds report also revealed the drop in wealth, the first drop since March 2009. Certain home values rose due to the Obama Administration's tax incentive that expired in April 2010, however, going forward the recent home price gains may likely be followed by a downward trend. The drop will inevitably take away U.S. consumer spending power, which makes up 70 percent of the world's largest economy.
Data released last Thursday by the U.S. Census Bureau also indicated the degree of financial crisis' impact and the subsequent recession has eroded household incomes. Consumer debt has fallen nevertheless, at 2.5 percent annually in the second quarter based on the Flow of Funds notice. Consumers are making more effort to pay down their debts, signaling a period of austerity and depressed earning power ahead.
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