Economic Report: Household wealth climbs $1.7 trillion on stock market, house price advances

The numbers: The net worth of households and nonprofits hit a record of $96.9 trillion after a $1.74 trillion increase, or 1.8%, gain in the third quarter, the Federal Reserve reported Thursday. Total debt grew at the fastest rate in nearly two years, 6.2% annualized, after the federal government was allowed to borrow again following the end of a debt-limit impasse.

What happened: The stock market rally continued in the third quarter, and that $1.1 trillion gain was the big driver of the gain in net worth. Rising house prices added another $400 billion.

On the borrowing front, the story continued to be the rise in corporate debt, rising 6.4% annualized, as well as the continued auto- and student-loan driven rise in consumer credit, which rose 4.9% annualized.

Big picture: It’s important to note the rise in household wealth is not evenly spread. Not remotely. According to a separate survey from the Federal Reserve, the bottom 90% of families held 22.8% of the wealth in 2016. To the extent the rise in household wealth helped middle-income families, it’s through the rise in real estate values.

Cash on corporate balance sheets rose to $2.36 trillion from $2.298 trillion. As the Federal Reserve prepares another rate hike, companies have 27.65% of their debt in short-term borrowings.

What they’re saying: “That the lion’s share of the gains boosting household net worth were in equities, and financial assets more generally, rather than in real estate is another reason why leverage remains low. Households historically borrow more off of improved home values than rising wealth from stocks and bonds – at least before 2008,” said Steven Blitz, chief U.S. economist at TS Lombard.

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