A real estate sign posed in front of a home states that it is under contract, Friday, Aug. 21, 2009 in Rockport, Mass. Home resales in July posted the largest monthly increase in at least 10 years as first-time buyers rushed to take advantage of a tax credit that expires Nov. 30.(AP Photo/Lisa Poole)

U.S. Housing (Homeownership Drives Wealth)

Americans Total Wealth Hits Record $88 Trillion:Fed

By Economic Indicators Dow Jones Newswires

The wealth of Americans reached a record of $88.1 trillion in the first quarter, with rising home values offsetting stock-market wobbles at the start of the year. 

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The boost to wealth was driven by a $498 billion increase in residential real-estate values around the U.S., while the overall value of equities declined by $160 billion, according to a Federal Reserve report released on Thursday.

The new data underscores just how much American fortunes have changed since the recession that began in 2007, and occurred along with a housing and stock market crash. U.S. households lost more than $12 trillion during that period, with net worth bottoming at $55 trillion in 2009. Since then, wealth has risen by more than $33 trillion. The figures aren't adjusted for inflation, but with inflation generally low in recent years, wealth has rapidly outpaced inflation. 

The Fed report tracks the aggregate balance sheet of U.S. households, to show how the components of wealth shift over time. In this report, the Fed provides no breakdown of the distribution of these assets among households or demographic groups. The report also includes the assets of nonprofit organizations. 

"Real estate wealth tends to be a bit more evenly spread across households than equities," said Paul Ashworth, chief U.S. economist for Capital Economics. The U.S. homeownership rate is 63.7%, so an increase in home prices is likely benefiting many middle-class households, he said. 

And the increase in home prices may especially be benefiting households who saw in recent years their homes go underwater, where the mortgage on a home is larger than the home's value. Rising home prices have lifted many families out of that situation. 

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"People are freer to go out and spend now, based on those wealth gains," said Mr. Ashworth. 

Mortgage balances are growing slowly, while home prices are increasing steadily. The total amount of home equity has almost recovered to its level at the housing bubble's peak, and could set a new record later this year. 

The report doesn't provide a complete breakdown of nonprofit organizations' wealth vs. household wealth, but when it comes to real estate, 86% of the wealth is held by households, and only 14% by nonprofits. 

One key difference between the increase in asset values today versus a decade ago is that Americans aren't taking on as much debt. Total household liabilities rose by $17 billion in the first quarter and remained lower than their level during the financial crisis. 

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com