Families’ median net worth fell almost 40% between 2007 and 2010, down to levels last seen in 1992, the Federal Reserve said in a report Monday.
As the U.S. economy roiled for three tumultuous years, families saw corresponding drops in their income and net wealth, according to the Fed’s Survey of Consumer Finances, a detailed snapshot of household finances conducted every three years.
Median net worth of families fell to $77,300 in 2010 from $126,400 in 2007, a drop of 38.8%–the largest drop since the current survey began in 1989, Fed economists said Monday. Net worth represents the difference between a family’s gross assets and its liabilities. Average net worth fell 14.7% during the same three-year period.
Much of that drop was driven by the housing market’s collapse. Families whose assets were tied up more in housing saw their net worth decline by more. Among families that owned homes, their median home equity declined to $75,000 in 2010, down from $110,000 three years earlier.
Between 2007 and 2010, incomes also dropped sharply. In 2010, median family income fell to $45,800 from $49,600 in 2007, a drop of 7.7%. Average income fell 11.1% to $78,500, down from $88,300. That was a departure from earlier in the decade. During the preceding three years, median income had been constant, while the mean had climbed 8.5%.
Family incomes also dropped the most in regions of the country hardest hit by the housing market tumble. Median family income in the West and South decreased substantially, while those in the Northeast and Midwest saw little change.
Incomes dropped the most among middle-class families. The wealthiest 10%, by net worth, saw their median income fell 1.4% over the three years, while families in the second and third quartiles experienced a drop of 12.1% and 7.7%, respectively. The lowest quartile’s median income fell by 3.7%.
Families also grew less confident about how much income they could expect in the future. In 2010, just over 35% of families said they did not “have a good idea of what their income would be for the next year,” up from 31.4% in 2007.
Meanwhile, families worked to drive down their level of debt. Fewer families reported having debt of any kind in 2010 than three years earlier: 74.9% of families had some sort of debt in 2010, down from 77%. However, among families with some kind of debt in 2010, the median value of their debt was unchanged from three years earlier and the fraction of families with debt payments larger than 40% of their income remained nearly constant.
Some families appeared successful in shaving down their burden of debt, particularly on their credit cards. The proportion of families carrying a balance on their credit cards fell 6.7 percentage points to 39.4% in 2010. Among those families, the median balance fell 16.1% to $2,600, while the average balance fell 7.8% to $7,100.
However, some families struggled more to pay their bills on time: the share of families making debt payments that were late by 60 or more days increased to 10.8% in 2010, up from 7.1% in 2007.
And overall, debt as a percent of families’ assets grew to 16.4% in 2010, up from 14.8% in 2007, largely because the value of the assets, such as housing, decreased.
Families were also less likely to save up money. The proportion of families that said they had saved in the preceding year fell from 56.4% in 2007 to 52% in 2010, the lowest level since the Fed began collecting that information in 1992.
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