U.S. Household Balance Sheet Continues to Recover in Q3 2018


The third quarter Federal Reserve Flow of Funds report showed continued improvement in the financial position of U.S. households with real estate, as the market value of all owner-occupied residential real estate (household owned) rose to $25.6 trillion. According to NAHB tabulations of the quarterly series, the asset or market value of owner-occupied real estate held by U.S. households increased $298 billion dollars while the liabilities (home mortgages) increased by about $90 billion from the second quarter reading.

The housing market’s value of owners’ equity in real estate as a percentage of household real estate reached 59.9% in the third quarter of 2018, a level had not been seen since 2002. On the other hand, the greatest quarter-to-quarter percent increase in households’ equity position, that is, the difference between assets and liabilities, occurred not in 2018 but in 2017. The 2018 third quarter’s increase in equity position was 1.4%, which was substantially lower than the quarter-to-quarter increases of over 2.0% in the previous year’s quarters. Owner-occupied real estate including vacant land and mobile homes at market value reached and went past the highest it had ever been prior to the recession, which was $22.64 trillion in June 2006. The break-even occurred in the fourth quarter of 2016. Thus, both in terms of market value and owners’ equity as a percentage of market value, households’ balance sheets have reached pre-recessionary levels.

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