March 26, 2018
Orion’s top brokers are not only well-versed in loan details, but they also help their clients by watching overall economic trends. Key indicators associated with household wealth might give the impression that balance sheets should be in much better shape than they are. Home prices, for example, are at or near their pre-recession peak in many markets, and Orion’s AEs report prices are continuing higher. Despite volatility in March, stock prices are more than 80 percent above their prerecession peak. Yet, in inflation-adjusted terms, median household net worth is still about 30 percent below where it was back in 2007. Only the wealthiest American families have fully recovered from the financial crisis.
Our brokers are aware that residential debt is the most commonly-owned type of debt, after credit card debt, and makes up the largest share of debt that families hold. A main contributor to debt reduction since the Great Recession is fewer, smaller mortgages. For mortgage owners, median and mean mortgage debt have both declined by about $13,500 since 2007. In addition, fewer families have mortgages: 40 percent of families in 2016, compared to 46.3 percent in 2007. Lower debt among families is not just a result of paying down mortgage balances, but also because fewer families are participating in the real estate market. The homeownership rate has declined from 69 percent in 2007 to less than 64 percent today.
But it’s not what you owe, it’s what you own. The median family which holds assets owned about $256,500 worth in 2007 (in 2016 dollars), has since dropped to $189,900. In contrast, the mean family with assets now values these at about $792,000, up from $775,900 just before the financial crisis. The decline in homeownership is concentrated at lower percentiles of wealth.
The share of middle-wealth families owning other types of assets has also fallen at a faster rate versus high-net-worth families. Lower asset ownership subtracts from net worth, since the value of asset holdings declines. Even for middle-net-worth families who own assets, they have not added as much to their holdings since 2007.
The combination of lower asset ownership rates and smaller holdings for middle-wealth families, therefore, is a major reason that explains why mean family net worth has recovered since the Great Recession while median family net worth has languished. And through all of this, Orion has been here to help our brokers with their clients!