Home prices, for example, are at or near their pre-recession peak in many markets. Stock prices are more than 80 percent above their prerecession peak. Yet, in inflation-adjusted terms, median household net worth is still about 30 percent below where it was back in 2007. Only the wealthiest American families have fully recovered from the financial crisis.
The outsized wealth gains recorded in recent years by high-net-worth families are reflected in the disparity between median and mean net worth, which have de-coupled since 2007. This is because “mean” net worth is calculated by taking the average net worth of all families, and is pulled up by very high values at the top of the distribution. Meanwhile, “median” net worth is that of the middle family (50th percentile), and is therefore not lifted by extreme values at the top of the net worth distribution, or impacted by changes isolated at either end of the distribution.
Before the financial crisis, net worth for the median American family was growing on a similar trend as net worth across all families. However, after 2007, high-networth families experienced much larger gains (Or smaller declines) in net worth than middle-wealth families. As a result, the mean – pulled up by wealthy families – did not show the same precipitous decline as median net worth post-financial crisis.
It’s Not What You Owe, it’s What You Own
The source of the divergence in median and mean net worth is asset values more than quantity of debt. Whereas the median family which holds assets owned about $256,500 worth in 2007 (in 2016 dollars), this has since dropped to $189,900. In contrast, the mean family with assets now values these at about $792,000, up from $775,900 just before the financial crisis. This story has to do with the mix of assets that families of different wealth levels own, and trends in ownership rates. When looking at homeownership by net worth percentile, we see that the decline in homeownership is concentrated at lower percentiles of wealth. From 2007-2016, the share of families in the second quartile of net worth (25th-49th percentile) owning homes declined 14.1 percentage points to 58.1 percent, compared to a 2.2 percentage point decline in homeownership to 94.6 percent for families in the top decile of wealth (Figure 5). The share of middle-wealth families owning other types of assets has also fallen at a faster rate versus high-net-worth families. Fewer families in the second quartile of the net worth distribution are owning vehicles (-1.5 points), retirement accounts (-5.5 points) and stocks (-4.3 points). Meanwhile, families in the top decile of net worth own stocks at a slightly lower rate (-1.8 points), but more own retirement accounts (+3.8 points) and about the same percentage own vehicles. Lower asset ownership subtracts from net worth, since the value of asset holdings declines. Even for middle-net-worth families who own assets, they have not added as much to their holdings since 2007. Families in the second quartile saw retirement account and stock median values decline 13.8 percent and 5.7 percent, respectively. For families in the top decile, retirement accounts gained 71.3 percent and stocks 38.1 percent over the same period. This has exaggerated the pre-existing disparity in the value of asset holdings between middle and high-net-worth families.
https://www.fxstreet.com/analysis/the-rich-get-richer-ownership-drives-net-worth-201802021715
The outsized wealth gains recorded in recent years by high-net-worth families are reflected in the disparity between median and mean net worth, which have de-coupled since 2007. This is because “mean” net worth is calculated by taking the average net worth of all families, and is pulled up by very high values at the top of the distribution. Meanwhile, “median” net worth is that of the middle family (50th percentile), and is therefore not lifted by extreme values at the top of the net worth distribution, or impacted by changes isolated at either end of the distribution.
Before the financial crisis, net worth for the median American family was growing on a similar trend as net worth across all families. However, after 2007, high-networth families experienced much larger gains (Or smaller declines) in net worth than middle-wealth families. As a result, the mean – pulled up by wealthy families – did not show the same precipitous decline as median net worth post-financial crisis.
It’s Not What You Owe, it’s What You Own
The source of the divergence in median and mean net worth is asset values more than quantity of debt. Whereas the median family which holds assets owned about $256,500 worth in 2007 (in 2016 dollars), this has since dropped to $189,900. In contrast, the mean family with assets now values these at about $792,000, up from $775,900 just before the financial crisis. This story has to do with the mix of assets that families of different wealth levels own, and trends in ownership rates. When looking at homeownership by net worth percentile, we see that the decline in homeownership is concentrated at lower percentiles of wealth. From 2007-2016, the share of families in the second quartile of net worth (25th-49th percentile) owning homes declined 14.1 percentage points to 58.1 percent, compared to a 2.2 percentage point decline in homeownership to 94.6 percent for families in the top decile of wealth (Figure 5). The share of middle-wealth families owning other types of assets has also fallen at a faster rate versus high-net-worth families. Fewer families in the second quartile of the net worth distribution are owning vehicles (-1.5 points), retirement accounts (-5.5 points) and stocks (-4.3 points). Meanwhile, families in the top decile of net worth own stocks at a slightly lower rate (-1.8 points), but more own retirement accounts (+3.8 points) and about the same percentage own vehicles. Lower asset ownership subtracts from net worth, since the value of asset holdings declines. Even for middle-net-worth families who own assets, they have not added as much to their holdings since 2007. Families in the second quartile saw retirement account and stock median values decline 13.8 percent and 5.7 percent, respectively. For families in the top decile, retirement accounts gained 71.3 percent and stocks 38.1 percent over the same period. This has exaggerated the pre-existing disparity in the value of asset holdings between middle and high-net-worth families.
https://www.fxstreet.com/analysis/the-rich-get-richer-ownership-drives-net-worth-201802021715
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