American family net worth hits lowest level in 20 years

???The Federal Reserve???s detailed survey of consumer finances showed families??? median wealth plunged from $126,400 in 2007 to $77,300 in 2010 ??? a 39 percent decline,??? reports the Washington Post.  ???That put them on par with median wealth in 1992.???

A great deal of this is attributed to the collapse of the housing market, which wiped out 42.3 percent of home equity between 2007 and 2010.  On the other hand, only 69 percent of Americans owned homes at the peak of the housing market in 2004.  It was down to around 67 percent by the end of last year.  A 42 percent loss of value in equity held by 67 percent of the population can only account for about half of the overall 39 percent drop in family wealth.

The housing market has actually recovered a bit, although most analysts say the damage will take years, perhaps decades, to undo.  As recently as last week, there was some optimism that the Fed???s new report would show an increase in family net worth.

???Although there have been some signs that the recovery has picked up steam ??? housing prices have begun to stabilize and unemployment has fallen ??? Fed economists said those improvements largely do not change the survey results,??? says the Post, with a certain degree of befuddlement.  In reality, there is nothing confusing about this news.  Unemployment has not ???fallen.???  The workforce has contracted, causing the carefully massaged numbers reported in the press to improve slightly??? until last month, when even the cooked unemployment rate got worse.

Moreover, almost all of Barack Obama???s meager job growth has been part-time work.  We haven???t seen any sort of jobs recovery over the past year.  We???ve been watching the American economy transition to a part-time workplace, in which full-time, long-term employment becomes a rare prize.  Of course this is reflected in reduced family wealth, particularly when combined with a mix of falling home ownership and collapsed home equity.

That???s a curious combination, isn???t it?  If home values are falling, shouldn???t more people be snapping up those bargains?  But they don???t, partially because loans are tough to get.  $34.6 billion of the TARP bailout money given to banks is sitting idle, as is $568 million of the money Congress allocated to help unemployed families avoid foreclosure.

Worse still is the corrosive effect of our high unemployment and under-utilized part-time workforce on home ownership.  The unemployed and under-employed have a particularly hard time securing home loans, and of course many of them don???t want to take on the burden of 15 or 30-year mortgages when their employment status is uncertain.  Marriage has been in decline, and unmarried people are naturally more reluctant to sign six-figure mortgages.

Houses are traditionally a great storehouse of American family wealth.  They are among the largest investments made by average people.  They become a valuable inheritance, passing wealth forward between generations.  Home ownership builds community roots, and connects citizens to civic life through the payment and disposition of property taxes.  There is simply less room for this sort of wealth-building in an economy filled with nervous, unmarried part-time workers living in rented apartments.