American households have never been wealthier, says Fed data — but here’s why millions are still treading water

U.S. household wealth increased by $5.5 trillion to a record $154.3 trillion in the second quarter of this year, according to data from the Federal Reserve Bank of New York.

The wealth boost was spurred by gains in stock and house prices — which remain the largest components of household net worth.

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• In the three months ending June 30, the value of directly and indirectly held corporate equities jumped by $2.6 trillion to $44.7 trillion.
• Meanwhile, the value of household real estate increased by $2.4 trillion to $44.5 trillion.

This positive data (which isn’t adjusted for inflation) is a welcome sign of recovery after inflation drove a drop in the value of those assets in the last half of 2022. And it should give Americans more confidence to weather future financial storms — but will it?

Financial optimism is shaky

Despite U.S. household wealth hitting a new record high — trumping the prior record of $152 trillion set in early 2022 — financial services giant Moody’s Analytics remains skeptical.

“Even with the recent gain, wealth is little changed over the past year, limiting its contribution to spending,” Moody’s economists wrote in a report on Friday. “Further, volatility in wealth since the onset of the pandemic will remind households of the fragility of any gains.”

U.S. households seem equally nonplussed. The New York Fed recently released the August 2023 Survey of Consumer Expectations, which found that households’ perceptions about their current financial situations and expectations for the future have deteriorated.

Specifically, the median expected growth in household income fell by 0.3% to 2.9% in August, — its lowest reading since July 2021 — and median household spending growth expectations fell by 0.1% to 5.3%.

Read more: How can I stop the pain and make money in this nightmarish market? Here’s 1 simple way you can protect your nest egg

A debt and credit crisis

While the U.S. economy may have turned a corner and real estate values and the stock market rebounded — technically boosting the wealth of U.S. households — Americans are still feeling the sting of 11 interest rate hikes since March 2022 as the Federal Reserve worked to tame rampant inflation.

U.S. household debt rose by $16 billion to reach $17.06 trillion in the second quarter of 2023, according to the New York Fed’s Quarterly Report on Household Debt and Credit, as people struggled to cope with inflation, elevated interest rates and the high cost of living.

Credit card debt specifically jumped by $45 billion to a record high of $1.03 trillion and the rate of new credit card delinquencies hit 7.2% in the same period, passing pre-pandemic levels.

The majority of respondents in the New York Fed’s most recent consumer expectations survey said it was harder to get access to credit in August 2023 than it was a year ago — and most expect those challenges to continue.

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