US household wealth tops prerecession peak on rising stock market and higher

by Christopher S. Rugaber, The Associated Press Posted Mar 7, 2013 2:42 pm MDT WASHINGTON – It took 5 1/2 years.Surging stock prices and steady home-price increases have finally allowed Americans to regain the $16 trillion in wealth they lost to the Great Recession. The gains are helping support the economy and could lead to further spending and growth.The recovered wealth — most of it from higher stock prices — has been flowing mainly to richer Americans. By contrast, middle class wealth is mostly in the form of home equity, which has risen much less.Household wealth amounted to $66.1 trillion at the end of 2012, the Federal Reserve said Thursday. That was $1.2 trillion more than three months earlier and 98 per cent of the pre-recession peak.Further increases in stock and home prices this year mean that Americans’ net worth has since topped the pre-recession peak of $67.4 trillion, private economists say. Wealth had bottomed at $51.4 trillion in early 2009.“It’s all but certain that we surpassed that peak in the first quarter,” said Aaron Smith, senior economist at Moody’s Analytics.Household wealth, or net worth, reflects the value of assets like homes, stocks and bank accounts minus debts like mortgages and credit cards. National home prices have extended their gains this year. And the Standard & Poor’s 500 index, a broad gauge of the stock market, has surged 8 per cent so far this year.Some economists caution that the recovered wealth might spur less consumer spending than it did before the recession. Dana Saporta, an economist at Credit Suisse, notes that Americans are now less likely to use the equity in their homes to fuel spending. The value of home equity Americans are cashing out has fallen 90 per cent in six years, she said.And since the housing bust, when home values fell broadly for the first time in decades, many homeowners are skeptical that higher prices will last, Saporta said. They won’t necessarily spend more as a result.Finally, the upper-income Americans who have benefited most from the nation’s recovered wealth don’t tend to spend as much of their money as Americans overall do.But they’ve gotten a lot richer. The Dow Jones industrial average has just set a record high. Since bottoming in March 2009, the Dow has jumped 119 per cent. Roughly 80 per cent of stocks are held by the richest 10 per cent of households.For the past five years, middle-class Americans have sold stocks and missed out on much of the rebound. In the October-December quarter, Americans dumped nearly $466 billion in stocks and bought $229 billion in bonds, the Fed’s report showed.Homes accounted for two-thirds of middle-class assets before the recession, estimates economist Edward Wolff of New York University. Among all U.S. households, they accounted for only one-third of assets. And national home values remain about 30 per cent below their peak.Still, some Americans are benefiting from rising home prices — and spending more as a result.Helen Lyons of Takoma Park, Md., bought a home with her husband last year and is already seeing neighbours sell for much higher prices. That’s given her confidence that her home purchase will pay off.“I think we got in at exactly the right time,” said Lyons, 24. “We feel like we are sitting on something that is a potential investment, not just a place to live.”The increase in her home’s value has led Lyons and her husband, Nick Finio, to repaint the interior, landscape the yard and stain the porch.“You buy a house, you end up going to Home Depot and spending tons of money,” Lyons said.That helps explain why economists expect Americans’ regained wealth to contribute further to the economic recovery. Consumer spending accounts for about 70 per cent of the economy.“It should boost consumption, because as people feel wealthier they tend to spend more,” Saporta said. “It doesn’t necessarily mean that households will go on a spending spree.”Carl Riccadonna, an economist at Deutsche Bank, is a bit more optimistic. He thinks higher home values and some easing of credit requirements by banks will lead Americans to cash out more of their home equity.Riccadonna forecasts that the increase in home prices alone could boost consumer spending this year by roughly $110 billion — nearly offsetting the $120 billion cost of higher Social Security taxes that kicked in Jan. 1.The Fed report also showed that Americans are increasingly taking on more debt, enabling them to spend more. In the October-December quarter, household debt rose 2.4 per cent. It was the sharpest gain in nearly five years.And it marked a shift from when the recession ended in June 2009, after which many households focused on repaying debt rather than borrowing. Economists increasingly think that process, known as “deleveraging,” is ending.“The drag from deleveraging is now a thing of the past,” Smith said. “Household credit is once again supporting growth.”Smith noted that the two key trends in the Fed report — higher wealth and more consumer borrowing — are likely enabling people to spend more at a critical time: Most workers have had to absorb higher Social Security taxes this year. Someone earning $50,000 has about $1,000 less to spend in 2013. A household with two high-paid workers has up to $4,500 less.And gas prices have risen sharply. The average price for a gallon is $3.72, roughly 44 cents more than when the year began.“The combination of what we’re seeing in terms of wealth increases and higher household borrowing explains why spending has not fallen more in the face of higher taxes and gasoline prices,” Smith said.Household finances are still improving, even with the increase in borrowing. Total household debt amounted to about 100 per cent of after-tax income in the October-December quarter, down from 126 per cent in 2007.___AP Business Writer Bernard Condon in New York contributed to this report.___Follow Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber US household wealth tops pre-recession peak on rising stock market and higher home prices AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email read more

Top 50 over 50 list includes Brock alumnus Ted Mouradian

For Ted Mouradian (BA ’99), just being nominated for the Ageworks Top 50 over 50 list was an unexpected honour.“I just go about life doing my own thing,” he says. “It really is an honour to be nominated and then to find out that I made the list.”While he studied full time at Brock University as a mature student in his 40s, Mouradian developed the principles of the Law of Co-operative Action, which still guides his teachings and business practices today. These principles led him to grow from being a motivational speaker to working with the United Nations and dealing with worldwide conflicts.His business teaches the average person how to improve their life by changing how they relate to people and the world around them.With a laugh he says, “I teach people how to play nice in the sandbox.”Mouradian turns 70 on Valentine’s Day and says, “I want people to know that as seniors we don’t stop, I will never retire.”Also receiving the Top 50 over 50 award from the Niagara Region is Doug Rapelje, 84 of Welland, who received an honorary doctor of Law degree from Brock University in 2013 and is still an active member of the University community.Rapelje is part of Brock’s Seniors Advisory Council, a group of older adults who meet twice a year to help provide community insight to the researchers and staff at the University’s Centre for Lifespan Development Research.“Doug has been an invaluable resource around seniors’ issues and bridging the gap between research and practice for Brock faculty and older adults in our community,” said Lifespan Knowledge Mobilization Officer, Jayne Morrish. read more