US household wealth grew at a record pace during the pandemic as the government doled out unprecedented aid, Americans hunkered down amid widespread lockdowns, and stock and home values soared, according to a Federal Reserve survey.
From 2019 to 2022, the median net worth of US families jumped 37% to $192,900 in inflation-adjusted terms – the biggest increase in the history of the Fed’s Survey of Consumer Finances, which is conducted every three years.
Meanwhile, median income grew a relatively modest 3% and debt was fairly stable, the Fed said in the report.
During the pandemic, many households received financial windfalls from the government to keep families afloat amid widespread business closures and 22 million layoffs. This included three rounds of stimulus checks, increased unemployment benefits and a pause in student loan repayments.
Between 2019 and 2022, the share of families owning stocks rose from 15 per cent to 21 per cent, the largest increase on record. The median value of stock holdings fell from $29,000 to $15,000, but that’s because new stock owners had smaller portfolios than long-time stockholders.
What is the current homeownership rate in the US?
The share of families owning a home rose from 64.9% to 66.1%, and the median home value increased by 24% to $323,200. During COVID, millions of Americans left the cities and bought homes in suburban or rural areas, often buying larger homes to accommodate the increased time they spent at home and their remote work arrangements.
The large wealth gains during COVID have likely been reduced since last year, a trend that wasn’t captured in the survey. Stock prices have fallen as the Fed has raised interest rates sharply to fight inflation, and home values have fallen in many regions amid rising mortgage rates.
Is the wealth gap widening in the US?
But the gains were substantial and broad-based, lifting all racial, income, age, educational and other groups. Families who didn’t finish high school had the largest median increase in net worth, at 60%. Black families also saw a 60% increase in net worth, the largest among racial groups, but their median wealth in 2022 was $44,900, still far below the $285,000 for whites.
Households in the bottom quintile of wealth experienced the largest increase, with their median net worth rising from $400 to $3,500. The pace of increase was progressively slower for richer households, with the top tenth recording a 26% increase to $3.8 million. However, this was still the largest increase in dollar terms.
Among income groups, the increase in wealth was largest (69%) for those in the top 80-90% of income earners and smallest (24%) for those in the bottom fifth.
Is average income rising in the US?
Meanwhile, the median income will rise by a relatively modest 3 per cent to $70,300 between 2018 and 2021. The gain includes government assistance such as increased unemployment and food stamp benefits, but not stimulus payments, the Fed said.
A hefty 28% of families said their income was unusual in 2021, “reflecting the large imprint that COVID-19 and myriad pandemic-related policies left on the U.S. economy”. However, more families reported lower-than-usual incomes than higher-than-usual incomes, underscoring the pain caused by layoffs and reduced hours during the depths of the crisis.
Median income gains were concentrated among families with tertiary education. Those without a high school diploma saw their incomes fall by 10%. Income inequality widened as the bottom fifth of earners saw a 5% increase in median income, while the top tenth saw a 15% increase.
Among racial groups, white families had the largest income gain at 16%. Black and Hispanic families saw small declines.
As Americans moved to less populated areas to escape the pandemic, the income gap between urban and rural residents narrowed. Median income increased by 14% for families living outside metropolitan areas, compared with 4% for those living in metropolitan areas.
Median wealth also increased more for nonmetropolitan residents.
