Americans $1.7 trillion poorer

[marmar]

from CNN Money:



Americans $1.7 trillion poorer
Americans' net worth falls for the second straight quarter as home and stock prices decline, but it may not hurt consumer spending, experts say.


By Tami Luhby, CNNMoney.com senior writer
Last Updated: June 5, 2008: 4:12 PM EDT

NEW YORK (CNNMoney.com) -- Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.

Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday.

The value of real estate assets owned by households and non-profits declined by $305 billion, while financial assets fell by $1.3 trillion, led mainly by a $556 billion drop in stocks and a $400 billion decline in mutual funds.

The first quarter's decline follows a $530 billion drop in wealth in the fourth quarter of 2007. Until then, net worth had been rising steadily since 2003, climbing nearly 31% over those five years. During the bear market of 2000 through 2002, household's net worth dropped 6.2%.

Spending more

The recent declines, however, may not affect consumer spending, said Michael Englund, senior economist with Action Economics. Americans have actually spent more in recent months, particularly at the gas pump as fuel prices soared.

Americans "are spending everything in their wallet and borrowing more," Englund said. "But because the pump takes so much more of their dollars, they are buying fewer T-shirts."

Still, as people feel begin to feel poorer, the growth in consumer spending may slow, said Scott Hoyt, senior director of consumer economics at Moody's Economy.com.

"When wealth goes down, consumers will cut back some," he said. "There will be a drag on spending."

Household debt grew by 3.5% in the first quarter, down from 6.1% in the fourth quarter. The growth of home mortgage debt, including home equity loans, cooled to an annual rate of 3%, less than half the pace of 2007. Consumer credit, which includes credit cards, rose at an annual rate of 5.75%, the same as the 2007 pace.

The fact that consumers continue to borrow against their homes, even as they decline in value, shows how troubled Americans are. ........(more)

The complete piece is at: http://money.cnn.com/2008/06/05/news/economy/fundflows/index.htm

[whistle]

1. This is the dump republicans adjustment factor

[onehandle]

2. Yeah, but 1.6 trillion of that was mine.

The rest is just chump change.

[Doug.Goodall]

3. It is a small price to pay in order to give tax breaks to the richest Americans

[Bob Dobbs]

4. I would say, "Eat the rich. . ."

But I'm a vegetarian, and they would just cause cancer, anyway.

Guillotines sound about right, however.