We’ve endured The Great Recession, and many of us feel as if we’re still in the midst of it. The Federal Reserve recently issued a report on just how negatively The Great Recession impacted Americans’ bottom line. The median net worth of Americans declined 38.8 percent from 2007-2010 from $126,400 to $77,300 (see Chart #1).
This is a level not seen since the 1990s, according to the Federal Reserve’s Survey of Consumer Finances. “We are talking about a wipeout of two decades,” says Susan Wachter, Professor of Real Estate and Finance at The Wharton School. Net worth is the difference between assets and liabilities.
Chart: Median Family Net Worth
Median family net worth is also broken out by race. “The adverse effects were equal opportunity, it hit whites and nonwhites very hard,” says William Rodgers, Professor of Public Policy at Rutgers University.
White non-Hispanics had a median net worth of $130,600, which is 27.2 percent less than in 2007, while nonwhites or Hispanics saw their median net worth plunge 31.3 percent over the same period. Despite the decline across all groups, median family net worth for whites non-Hispanics is 6.4 times greater than for nonwhites or Hispanics. (See Chart #2).
Chart: Median Family Net Worth by Race or Ethnicity
Has the American Dream Turned Into A Nightmare?
The Federal Reserve says the decrease in net worth was driven largely by a strong collapse in home prices. “The recession and recovery has had an unprecedented and adverse effect on American families, especially with the housing market,” says Rodgers. He says a home is typically the largest and most important asset the average American family will own.
The home ownership rate dropped 1.3 percent from 2007 to 2010 to 67.3 percent. It also declined from 2004 to 2007, after peaking at 69.1 percent in 2004.
With home prices still depressed, should Americans give up on the American dream of owning a home?