Friday, March 08, 2013

Our Household Wealth Recovery

U.S. Household Wealth Regains Pre-Recession Peak reports that $16 trillion lost in the Great Recession has been regained.   Most of the rebound has been due to a rise in the stock market with the rest due to an increase in home equity.   The rebound has benefited those who own equities: the top 10% of wealth, who own 80% of stocks; and employees with 401Ks invested in stock.   For most Americans, home equity is the largest element of wealth and, and while higher, home prices are still down 30% from the 2007 peak. However, consumers are still cautious about spending, which economists don't expect to reach 2007 levels.

The article mirrors the financial gain that we've experienced since the Great Recession.   90% of our wealth recovery has come from the gain in my company stock and company stock options, despite being significantly below 2007 highs until recently.   Another 10% came from the other stocks that we own.    Our home is still 30-40% below 2007 highs, but only 20% below our 2003 purchase price.

At this point, I do not have confidence that the stock market gain are sustainable and remain cautious with our retirement savings. Also, I expect that housing prices will continue to rise slowly and that we won't fully recover our purchase price for five more years.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial,investing or retirement advice. Please consult a professional advisor.

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