According to a study published Tuesday by the Federal Reserve, household wealth in the US plummeted nearly 40 percent between 2007 and 2010, with most of the losses coming as a result of the housing crash. According tot the report, the median net worth across the nation fell from $126,400 in 2007 to just $77,300 in 2010 as plummeting home values wiped away an estimated 18 years of savings and investments by American families.
Known as the Survey of Consumer Finances, the study is undertaken every three years by the Fed, and calculated everything from savings, income and debt to investments and assets held by US households. The results of the study show the massive impact on American wealth stemming from the housing crash and the worst recession in the country since the 1930s. The Fed noted that the dropoff brought US median net worth down to levels not seen since 1992.
The majority of Americans' decline in net worth came as a result of falling home prices, as buying a home is often the biggest investment consumers ever make. In 2007, the first year included in the study, the average American homeowner had a net worth of $246,000, according to the study. By 2010, that number had fallen by more than $70,000 to about $175,000. This wealth stripping effect of the housing crash was decidedly worse in the West and the South, which were hit particularly hard by plunging home values.
While the housing crash was a major factor in plunging household wealth in the US, it was not the only cause, as income levels also fell during the period. According to the study, median pre-tax income for Americans fell 7.7 percent from 2007 to 2010 as capital gains dried up amid stock market volatility. The loss in income impacted household savings, as well, as the number of Americans who said they saved fell from 56.4 percent in 2007 to 52.0 percent in 2010, marking the lowest level seen since the early 1990s.
Of course, not all the news in the Fed's report was negative, as the study showed a decline in American debt and credit card use. The percentage of American families with debt fell slightly to just under 75 percent, and the median credit card balance declined by 16 percent as overall use of credit cards subsided.