For the median household, net worth is estimated to have decreased at a greater rate – 23 percent in 2008.7 Household balance sheets may have contracted about another 7 percent in the first quarter, and I am watching keenly for that trend to change in subsequent quarters as part of the recovery.
House price declines accounted for much of the decline in net worth for the median household. But, more than in previous periods, household wealth was harmed by declining share prices through direct equity exposure and retirement plan holdings. Households are thus confronting the risks of income statement shocks through job losses and more significantly correlated changes in the value of virtually all other assets.