By: Dr. M. Ray Perryman
Published in syndication November 08, 2023
Every three years, the Board of Governors of the Federal Reserve System releases results of the Survey of Consumer Finances. The Survey looks at family income, net worth, debt, and other indicators of the financial health of US families. The most recent report covers the interesting time period from 2019 (just before the COVID-19 pandemic) to 2022. Let's explore a few interesting findings.
Although the pandemic has been devastating in many ways and the shutdowns and other disruptions to business activity caused massive dislocations, the Survey indicates that US families were actually better off financially due to the historic infusion of funds.
Income was up whether measured by the mean (average) or median (where half are above and half are below). The 2022 household income number reflects earnings in 2021, and many families were benefitting from pandemic-related federal relief packages. While the resulting enhanced unemployment and other benefits would be reflected, information on many stimulus payments was not included. Income increases were measured for most age groups and races/ethnicities. The highest median income group was Asian, with a median income of $122,600, followed by White non-Hispanic ($81,100), Hispanic/Latino ($46,700), and Black ($46,000) families. Not surprisingly, income remained highly correlated with education.
Looking at net worth (the difference between assets and liabilities), housing and equities both rose at rates outpacing general prices, leading to significant gains. Real median net worth was up 37% to $192,900, and real mean net worth increased by 23% to reach almost $1.1 million (obviously, wealthy households bring up the average). Net worth rose for all age ranges and education levels. Particularly notable percentage gains occurred in younger and less educated families.
The reasons for the improvement in financial wellbeing are varied. For many families, massive stimulus payments were used to pay down debt and increase wealth. Housing-related debt was fairly stable, but credit card balances dropped noticeably.
Homeowners' net worth was positively affected by soaring home prices. In fact, the Survey found that, for families that owned their home, the median net housing value (the value of a home minus the mortgage) rose from $139,100 in 2019 to $201,000 in 2022. The flip side of the surging housing market is that affordability fell to historic lows, with the median home value more than 4.6 times the median family income.
Despite the immeasurable human cost and dislocations accompanying the pandemic, it is interesting that from a purely financial perspective, most families were better situated in 2021 than they were in 2019. Nonetheless, it remains to be seen how future surveys will look given high inflation, a lagging housing market, the expiration of various stimulus initiatives, increasing consumer debt, and other issues surfacing since that time. Stay safe!