Americans suffered a record decline in wealth due to the recession between 2007 and 2010 as home values dropped to record lows, according to a Federal Reserve report released on Monday that detailed the extent of the recession.
According to the report, the median net worth of US families declined from $126,400 in 2007 to $77,300 two years ago after adjusting for inflation, according to the Fed’s survey of consumer finances.
Millions of Americans witnessed a sharp drop in the value of their homes, in many cases their main investment.
"Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices," the Fed said.
The survey's findings shine a harsh light on the devastation inflicted on the economy by the 2007-09 recession. The housing market's collapse was at the core of the recession, during which the economy contracted nearly 5.1 percent between the third quarter of 2007 and the second quarter of 2009, with the unemployment rate rising 4.5 percentage points to 9.5 percent.
"Housing was of greater importance than financial assets for the wealth position of most families," the Fed said.
Median household income was $45,800 in 2010, down from $49,600 in 2007 – and from $48,900 in 2001.
The new data on the financial health of American households comes amid a heated political debate over economic policy and the best ways to help the middle class.
The Fed data also showed steady erosion in the share of US families that are saving money – from 63.1 per cent in 2001, to 60.1 per cent in 2004, 56.4 per cent in 2007 and 52 per cent in 2010.
