U.S. Household Net Worth Rose by $2.07 Trillion in 3rd Quarter

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The household net-worth increase of $2.070 trillion in the quarter was smaller than the revised $2.278 trillion advance in the second quarter.

The household net-worth increase of $2.070 trillion in the quarter was smaller than the revised $2.278 trillion advance in the second quarter.


Photo:

Danny Johnston/Associated Press

The total net worth of U.S. households rose further into record territory during the third quarter of 2018, as higher property and stock prices boosted the wealth of Americans.

Household net worth—the value of all assets such as stocks and real estate minus liabilities like mortgages and credit-card debt—rose by 1.9% or $2.07 trillion in the third quarter to $109.04 trillion, according to a report by the Federal Reserve on Thursday.

The value of households’ real estate increased by about $298.4 billion in the third quarter, less than the $363.4 billion gain in the prior quarter.

The value of households’ real estate increased by about $298.4 billion in the third quarter, less than the $363.4 billion gain in the prior quarter.


Photo:

John Bazemore/Associated Press

That was a smaller increase than the revised $2.278 trillion advance in the second quarter.

The figures are from a quarterly report known as the Flow of Funds, which tracks the aggregate wealth of all U.S. households and nonprofit organizations. The report provides no details of how that wealth is distributed between households. The figures aren’t adjusted for inflation.

The pace of home equity gains slowed slightly, reflecting a cooling in the broader housing market—which makes up a sixth of the U.S. economy. The value of households’ real estate increased by about $298.4 billion. While home valuations remained high in the quarter, that advance was smaller than the $363.4 billion gain in the second quarter.

One reason could be cooling housing-price growth due to low inventory and rising mortgage rates. Price gains slowed in September for the sixth consecutive month, a sign that rising mortgage rates are helping sap the momentum of the housing market. Rates for a 30-year mortgage averaged 4.57% in the third quarter, compared with 3.88% in the same period a year earlier, according to Freddie Mac.

Despite a drag on growth from residential real estate, the first three quarters of this year were marked by strong economic expansion driven by a burst of fiscal stimulus from federal tax cuts and spending increases.

In the July to September period, gross domestic product—the value of all goods and services produced across the economy—rose at a 3.5% annual rate, adjusted for seasonality and inflation. That, plus the previous quarter’s 4.2%, growth marked one of the best six-month stretches for the U.S. economy in the past decade.

Strong U.S. growth helped power the stock market in the summer months: and the value of households’ holdings in the stock market increased by about $1.22 trillion in the third quarter, powering overall wealth gains in the third quarter.

Since the third quarter ended, the stock market has swooned, prompting worries that the nearly 10-year bull market could be running out of steam, despite ongoing growth in U.S. jobs, manufacturing, and corporate earnings. Concerns about the pace of growth have wiped out yearly gains for the S&P 500 and Dow Jones Industrial Average.

Households’ net worth nearly hit seven times their disposable personal income in the third quarter, at 699.9%, well above the earlier prerecession peak of about 660% in 2006. Household debt also increased at a slightly faster pace, rising at a 3.4% seasonally adjusted annual rate, up from a 2.9% rate in the second quarter.

Still, the report found that debt growth in the business sector slowed considerably in the third quarter. Business nonfinancial debt increased at a 3.9% seasonally adjusted annual rate in the third quarter, compared with a 6.9% rate in the second quarter.

“It’s a little bit encouraging that you see some slowing in business sector credit growth,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.

The report showed American households collectively were on a strong financial footing over the summer. They saved a bit less: the saving rate dropped to 6.3% of disposable personal income from 6.66% in the second quarter. Still, households have $9.586 trillion in deposits, which include checking and savings accounts and certificates of deposit.

Despite the household gains, the outlook is shifting both at home and abroad. Many large overseas economies showed signs of weakening in the third quarter and an uncertain trade environment could lead to economic turbulence in 2019, which could shake the stock market and impact U.S. household net wealth.

Write to Harriet Torry at harriet.torry@wsj.com