I never had anything to begin with, and I can't tell you how strange it feels to watch all my friends free-falling down to my level:
WASHINGTON — Americans' net worth plunged a record 17.9% in 2008 as the value of their homes, stocks and other assets dropped swiftly, the Federal Reserve said Thursday in a report that did not bode well for consumer spending and the overall economy this year.
With net worth dropping so much, consumers are likely to focus on saving, not spending, as they realize they can't rely on their homes and stock portfolios as ever-rising sources of income, says RDQ Economics senior economist Conrad DeQuadros.
Such saving, while good in the long run, will likely prolong the economic slump. Consumer spending drives more than two-thirds of U.S. economic activity.
"This does point to further weakness in consumer spending going forward," DeQuadros says.
"I was confident before that I was doing fairly well," says Sullivan of Venice, Fla. But, "I have no chance at all of recouping the money by the time I need it."
U.S. net worth, a measure of households' assets minus their liabilities, such as debt, was $51.5 trillion in 2008, the lowest since 2003. The record annual drop in net worth, the first since 2002, accelerated as the year progressed. In the fourth quarter, household net worth dropped 9%, the biggest decline since quarterly records began in 1951, the Fed said.
Other details from the report:
• The value of household real estate fell for a second-consecutive year in 2008, declining 10.5%, the biggest drop on record. At $18.3 trillion, the total value of U.S. homes was the lowest in five years.
• Stock market wealth plunged a record 39.9% in 2008 to $5.5 trillion, the lowest since 1996.
• Corporate profits fell 10.8% in the September-December quarter and were down 8.8% for the year as a whole.