The recent financial crisis left the median American family in 2010 with no more wealth than they had in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.
The median family, richer than half of the nation’s families and poorer than the other half, had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said. The crash of housing prices explained three-quarters of the loss.
This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell by 7.7 percent over the same period.
The new data come from the Fed’s much-anticipated release Monday of its triennial Survey of Consumer Finance, one of the broadest and deepest sources of information about the financial health of American families. The latest survey is based on data collected in 2010. Figures are reported in 2010 dollars.
Unsurprisingly, the report is full of grim news, and although it is news from 18 months ago, fresher sources of economic data make clear that most households have since seen only modest increases, at best, in wealth and income.
Despite these setbacks, consumers have continued to spend surprising amounts of money in recent years, helping to keep the economy growing at a modest pace. The survey underscores where the money is coming from: Americans are saving less for future needs and making little progress in repaying debts.
The share of families saving anything over the previous year fell to 52 percent in 2010 from 56.4 percent in 2007. Other government statistics show that total savings have increased since 2007, suggesting that a smaller group of families are saving more money, while a growing number manage to save nothing.
The survey also found a shift in the reasons that families set aside money, illustrating the lack of confidence that is weighing on the pace of economic growth. More families said they were saving as a precautionary measure, to make sure they had sufficient liquidity to meet short-term needs. Fewer said they were saving for retirement, education or for a down payment on a home.
And the report highlighted the fact that households have made limited progress in reducing the amount that they owe to lenders. The share of households reporting any debt declined by 2.1 percentage points over the last three years, but 74.9 percent of households still owe something and the median amount of the debt did not change.
The drop in reported incomes could have increased the weight of those debts, requiring families to devote a larger share of income to debt payments. But one of the rare benefits of the crisis, lower interest rates, has helped to offset that effect. Families also have been able to reduce debt payments by refinancing into mortgages with longer terms and deferring repayment of student loans.
The survey also confirmed that Americans are shifting the kinds of debts that they carry. The share of families with credit card debt declined by 6.7 percentage points to 39.4 percent, and the median balance of that debt fell 16.1 percent to $2,600.
Families also reduced the number of credit cards that they carried, and 32 percent of families said they now had no cards, up from 27 percent in 2007.
The cumulative statistics concealed large disparities in the impact of the crisis.
The losses of income and wealth fell most heavily on the middle class. Families with incomes in the bottom and top 20 percent of the population sustained smaller losses on a percentage basis than those families in the middle 60 percent.
One reason for this disproportion is that the middle class puts its wealth in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other investments have recovered much of the value lost in the depths of the crisis, housing prices have hardly budged.