Household Net Worth Hits a Record While Corporate Balance Sheets Improve

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Household net worth rose to a new record in the fourth quarter of 2021. Household net worth totaled $150.3 trillion, up 3.7 percent or $5.7 trillion from the previous quarter, and 14.4 percent from the end of 2020 (see first chart). Total assets rose 3.5 percent to $168.6 trillion while total household liabilities increased 2.2 percent or $387.0 billion, to $18.4 trillion (see first chart).

Total assets consisted of $118.2 trillion of financial assets and $50.4 trillion of nonfinancial assets. The gain in total assets was due to a 3.4 percent increase in financial assets which contributed $3.9 trillion to the increase in net worth (see second chart). Within financial assets, equities led with a $1.6 trillion or 5.3 percent rise. Nonfinancial assets rose 3.7 percent, contributing $1.8 trillion to net worth (see second chart). Within nonfinancial assets, real estate had a 3.5 percent rise. The change in total liabilities was led by a $245.2 billion, or 2.1 percent, increase in mortgage debt to $11.7 trillion, while consumer credit increased $96.3 billion or 2.2 percent to $4.4 trillion (liabilities are shown as negatives; see second chart).

For the nonfinancial corporate sector, total assets rose 2.9 percent or $1.5 trillion, to $55.0 trillion while total liabilities rose 1.4 percent or $361.3 billion, to $25.6 trillion (see top of third chart). That puts the ratio of liabilities to assets at 46.5 percent, down from 47.1 percent at the end of the third quarter and two full percentage points below the 48.5 percent of the final quarter of 2020 (see bottom of third chart). The final quarter of 2021 is down from a recent peak of 49.5 percent in the first quarter of 2020 and close to the 45.8 percent midpoint of the 41.1 percent to 50.5 percent range since 1990 (see bottom of third chart again).

Overall, the data show that despite the damage done to the economy by the government lockdowns and severe recession in 2020, in aggregate, household balance sheets are relatively strong. Likewise, nonfinancial corporate balance sheets have improved somewhat over the last two years, suggesting a slightly lower level of risk. However, household net worth is likely to suffer a setback in the first quarter as equity market prices plunge in early 2022, largely due to the Russian invasion of Ukraine.

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