Brutal Recession Destroyed Americans' Wealth, Net Worth Down 40% In 3 Years

Just how bad have the last three years been for some
Americans? A Fed survey has some brutal data today showing that both
median family income and net worth dropped dramatically over the last
three years.

The median family net worth dropped a staggering 40% to $77,300 in
2010 from $126,400 in 2007, the Fed said in its Survey of Consumer
Finances which is released every three years. The median family income
dropped as well from $49,600 in 2007 to $45,800, or a 7.7% drop.

Middle-class families faced the brunt of the declines with those in
the 60th to 80th percentile of income seeing a 40.4% drop in net worth
from $215,700 to $128,600. Families with a net income in the the 20th to
39.9th percentile of income saw a 35.4% drop in net worth from $39,600
to $25,600.

The Fed’s survey, which was conducted in 2010, shows just how badly
some Americans were hit by the recession. The daunting figures are the
result of one of the worst economic periods the U.S. has seen since the
Great Depression. Of course, the net worths of Americans are directly
tied to the value of their homes which have sunk dramatically in the
period.

From the Fed survey:

Families’ finances are affected by both their own decisions
and the state of the broader economy. Over the 2007–10 period, the U.S.
economy experienced its most substantial downturn since the Great
Depression. Real gross domestic product (GDP) fell nearly 5.1 percent
between the third quarter of 2007 and the second quarter of 2009, the
official period of recession as determined by the National Bureau of
Economic Research. During the same period, the unemployment rate rose
from 5.0 percent to 9.5 percent, the highest level since 1983. Recovery
from the so-called Great Recession has also been particularly slow; real
GDP did not return to pre-recession levels until the third quarter of
2011. The unemployment rate continued to rise through the third quarter
of 2009 and remained over 9.4 percent during 2010. The rate of
inflation, as measured by the consumer price index for all urban
consumers (CPI-U-RS), decreased somewhat over the period from an annual
average of 2.8 percent in 2007 to 1.6 percent in 2010.

The survey shows that Americans have been spending the last three
years paying down debt. The Fed report notes, “The share of families
with any type of debt decreased 2.1 percentage points to 74.9 percent
over the 2007–10 period (first half of tables 13.A and 13.B, last
column), reversing an increase that had taken place since 2001.” In
particular, the share of a family’s outstanding credit card balances
decreased 0.6% over the three-year period.

See how net worth has changed over the last three years: