The great recession, it seems, goes on. While I don’t like statistics as morality, and I hate how much this stuff lends itself to inane talking points in politics, this was just striking. I saw it on CNN Monday: Family net worth plummets 40%. The illustration is by CNN, and sources are cited in the small print.
The piece says:
The stunning drop in median net worth — from $126,400 in 2007 to $77,300 in 2010 — indicates that the recession wiped away 18 years of savings and investment by families.
I’m not an economist so I don’t draw conclusions. I am a skeptic so I question the statistics, always; but this seems hard to dispute.
And we see it, don’t we? Aside from the politics? People out of work, people looking for jobs, people sticking to jobs they hate. The great recession of 2007-09 dropped 10 or 12 millions out of the economy, out of work. Millions of them are still down looking up. No wonder growth is down and sales sluggish.
These are hard times.
4 thoughts on “Shocking Post-Recession Economic Bar Chart”
This doesn’t surprise me at all. Most families have e majority of their wealth tied up in their home, not in savings or investments. (calling your house an investment is debatable). In 2007 houses were incredibly overvalued, so the $126,400 figure is way overstated. So while true, this is more a statement of the readjustment being made than the destruction of real wealth. Did people dive into savings and lose money on investments, yes. But most of this was home values.
Very good point, Adam. Even though the data is heavily skewed downward by the correction in housing prices, the graph still portrays a disturbing image.
Even with this expected data, the average American family still feels significantly poorer than it did five years ago. That means less consumer spending – the real linchpin of our economy – and less of a desire to take measured risks like entrepreneurship.
Both of those areas will need to improve for the US economy to permanently get back on track. With the impending Federal fiscal cliff at the end of this year and with lots of global economic uncertainty, it doesn’t look good for the next 6-12 months.
After 40 years in business, I tend to think of myself as somewhat experienced in investing. In 2006 I was hired by a company in Central Florida and moved from Atlanta. We sold our home in Atlanta for $500,000 and had about $160,000 in equity accumulated over many years of home ownership. We “rolled” that into the new home in Central Florida. That home equity represented about 15% of our net worth at the time. The New home cost $585,000, and the mortgage on the new home was $435,000. Today our Florida home has a market value of $200,000, and we’ve paid down the mortgage to about $400,000, leaving us with $200,000 of “negative equity”.
The fact is that the entire cash equity from our Atlanta house is gone… $160,000. That’s not a phantom loss, that’s a real loss. We are also upside down another $200,000. To somehow imply that these losses aren’t “real money” because they’re just losses home equity doesn’t do justice to the crime the likes of Barney Frank and Chris Dodd perpetrated on many long-term homeowners when they decided home ownership was a civil right.
The straight arithmetic effect on our net worth today is a reduction of $360,000, about 36%. Let’s see, how much we will have to earn in order to be able to save and replace $360,000??
Thanks Jim, a good real-world addition. Brings it home, so to speak. And I’m sorry to read this one. Tim
You must log in to post a comment.