Minneapolis (CNN) — Americans’ net worth surged at a historic pace from 2019 to 2022, a reflection of the pandemic era’s tremendous economic swings and the wealth generated from homeownership and financial assets, according to Federal Reserve data released Wednesday.
Real, or inflation-adjusted, median net worth swelled by 37% in 2022 from the pre-pandemic 2019, according to the Fed’s latest Survey of Consumer Finances, a triennial survey that’s been conducted since 1989 to comprehensively measure income, net worth, credit use, debt and other financial outcomes for American families.
Although backwards-looking, the Fed report details the financial foundation behind the continued resilience that’s fueled US economic growth and jettisoned recession predictions.
However, the latest iteration of the survey also showed that income inequality widened and housing became increasingly unaffordable during this most recent three-year period, reinforcing previously released economic data and Americans’ lived experiences.
Still, the survey allowed Fed researchers to delve deeper into the finances of racial and ethnic groups — including breaking out data specific to Asian Americans for the first time — and into families’ pandemic experiences.
Growing wealth
Despite Black families experiencing the largest growth in median net wealth — a 60% bump from 2019 — their 2022 levels remained the lowest among all other racial or ethnic groups, and they also saw incomes falter.
White, non-Hispanic respondents’ incomes grew by 1% during that time, while Black and Hispanic/Latino respondents’ incomes fell by 2% and 1%, respectively.
Income was also higher for homeowners and those who lived in metropolitan areas.
The 37% rise in net worth, which was more than double the next-largest upswing on record, was largely fueled by asset growth — specifically home values and stock market gains that far exceeded consumer price inflation, Fed researchers said.
From 2019 to 2022, the homeownership rate increased to 66.1% from 64.9% three years earlier; however, median net housing values (home value minus home-secured debt) mushroomed by 45%. Three years earlier, at the tail end of the largest economic expansion in US history, net housing values increased by 13%.
New York Federal Reserve researchers previously estimated that millions of households extracted $430 billion during the “mortgage refinance boom.”
Pandemic-related migration patterns — people relocating to more affordable or rural areas because of the ability to work remotely — also played a role in boosting home values as well as closing the urban and rural income gap, the Fed said in Wednesday’s report.
The boom in home values was experienced across all income levels, but it also far surpassed the financial gains made, resulting in housing affordability falling to historic lows.
The median home was worth more than 4.6 times the median family income, according to the report.
Debt share continues to grow
The economic volatility during the pandemic also led to a bump in business ownership. In 2022, 20% of families owned a privately held business, the largest share on record, according to the report.
Real median family income grew by 3% from 2019 to 2022, with the largest increases occurring among the wealthiest individuals. Financial positions largely improved and a measure of financial fragility declined to a 20-year low.
Americans have a greater ability of staying current on their financial obligations; however, the share of families holding any type of debt grew to 77.4% from 76.6% from 2019 to 2022.
The report showed a spike in the share of “other installment loans,” rising 8 percentage points to 18.5% in 2022. That growth was attributed to Buy Now, Pay Later loans, Fed researchers said, noting that the 2022 report was the first time those installment payment offerings were included in survey questions.
Buy Now, Pay Later offerings have grown in popularity in recent years as a way to afford goods and services; however, the scale of the fast-growing financing programs and the debt incurred remain a virtual black box, as the segment remains largely unregulated and the information is not fully reported to credit agencies, lenders or government data-keepers.
The Fed report released Wednesday found that 7% of families reported they had an active BNPL plan, and the median balance was $300.
Last month, the New York Fed released research that showed BNPL loans were disproportionately used by people with lower credit scores and higher delinquencies, raising concerns about the loans’ potential to exacerbate financial difficulties.
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