U.S. household wealth reached unprecedented levels at the start of 2024, driven by a strong stock market. According to a Federal Reserve report released on Friday, household net worth surged by approximately 2.9%, or $5.1 trillion, from January through March. This increase brought the total household net worth to an all-time high of $160.8 trillion.
The primary driver behind this increase was a significant rise in the value of equities. The report highlighted that equities held directly or indirectly through mutual funds, life insurance policies, or retirement accounts saw a $3.8 trillion boost. This surge in value was largely fueled by the impressive performance of major stock indices. Since the beginning of the year, the S&P 500 has risen by about 13%, the Dow Jones Industrial Average by 3.2%, and the tech-heavy Nasdaq Composite by approximately 16%.
In addition to equities, real estate values also contributed to the rise in household wealth. The value of real estate owned by households climbed by about $900 billion, reaching a new record. This increase was driven by high mortgage rates and a limited supply of properties, which pushed prices even higher.
Despite the rising wealth, both consumers and businesses increased their borrowing in the first quarter. This occurred even as interest rates remained at their highest levels in 23 years. Business debt grew at an annualized rate of 4%, supported by a strong net issuance of debt securities. Mortgage debt expanded by 2.1%, while non-mortgage consumer credit grew by 1.8%. Federal government debt rose at a 6.2% annualized rate, and state and local government debt increased by 3%.
A separate report by the New York Federal Reserve indicated that Americans accumulated more debt in early 2024. Household debt reached a new record of $17.69 trillion, marking an increase of $184 billion or 1.1% from the previous quarter. This rise was primarily due to a jump in mortgage balances, which increased by $190 billion to $12.44 trillion by the end of March.
The reports also noted an uptick in delinquency rates. About 3.2% of outstanding debt was in some stage of delinquency by March, up from 3.1% the previous quarter, though still below the pre-pandemic average of 4.7%. Serious delinquency rates, where payments are more than 90 days overdue, increased across all debt types. The rise in delinquencies was particularly pronounced in credit card and auto loan payments, signaling worsening financial distress among some households.
“In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” said Joelle Scally, a regional economic principal within the Household and Public Policy Research Division at the New York Fed. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”
These developments highlight a dual narrative in the U.S. economy: while overall wealth is increasing, the burden of debt and financial stress is growing for many households. Investors and policymakers will need to closely monitor these trends to understand their long-term implications on the economy and financial markets.
The stock market’s strong performance has been a significant factor in the wealth increase. However, continued market volatility and potential interest rate changes by the Federal Reserve could impact future wealth growth. Investors remain cautiously optimistic, but the balance of rising wealth against increasing debt levels presents a complex economic landscape.
The Federal Reserve’s report underscores the resilience of U.S. household wealth amidst a surging stock market and rising real estate values. However, the concurrent rise in borrowing and delinquency rates suggests that financial challenges persist for many Americans. As the economic environment evolves, the interplay between asset growth and debt sustainability will be crucial in shaping the financial health of U.S. households.