<p>"-- U.S. household wealth fell in the third quarter by the most on record as property values and stock prices tumbled, highlighting the tattered state of consumer finances even before the most recent slump in lending. </p>
<p>Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952, according to the Federal Reserves Flow of Funds report issued today in Washington. Real-estate-related assets declined by $646.9 billion, three times the prior quarters drop. </p>
<p>Combined with the loss of 1.9 million jobs so far this year, almost half of which occurred in the last two months, and the slump in bank financing since the credit crisis intensified, the figures darken an already gloomy outlook for consumer spending. President-elect Barack Obama has called for a stimulus package of unprecedented size as the economy slides toward the longest postwar recession. </p>
<p>This is not pretty, said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. Its going to take a long time to repair balance sheets that are being severely impaired. Feroli estimated wealth will drop by about another $4 trillion this quarter if stocks stabilize at current levels and home prices decline at the same pace as in the third quarter. </p>
<p>Household net worth dropped to $56.5 trillion, the lowest level since the last three months of 2006, from $59.4 trillion in the second quarter. The decline over the 12 months ended in September, at 11 percent, is the biggest year-over-year drop since records began, exceeding the slump caused by the bursting of the bubble in technology stocks in 2001. </p>
<p>Consumer Slump </p>
<p>Consumer spending will probably decline 1 percent in 2009, making it the biggest drop since 1942, according to the median forecast of economists surveyed by Bloomberg News this month. The economy is projected to shrink for four straight quarters, the longest contraction since quarterly records began in 1947."</p>
<p>“Stung by the loss of more than $2.8 trillion in their net wealth, the nation’s households paid down debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday.
As of Sept. 30, the total outstanding debt for households shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It’s the first decline in household debt ever recorded in the report.
Households paid off more mortgage debt than they took on for just the second quarter on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion, as foreclosures mounted and fewer new mortgages were taken on.
Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion.
Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government, mostly to fund the Federal Reserve’s massive efforts to provide liquidity to credit markets. Excluding federal debt, U.S. debts rose at a 1% annual rate in the quarter.
Business debt increased at a 2.9% annual rate, the slowest in five years. Corporate debt rose at a 3.7% annual rate, a four-year low.
Net wealth
With the stock market plunging and home prices falling rapidly, American households lost a total of $2.81 trillion in wealth during the third quarter, the most ever. Wealth fell at an 18% annual rate during the quarter, a rate exceeded only once in the past 56 years.
Assets of households dropped by $2.7 trillion, while liabilities increased by $128 billion.”</p>
<p>“Most people in the NYC Metro Area feel they are thus far unaffected.”</p>
<p>I’m surprised to read this. I’m hearing and reading that bonuses are going to be way down. I would think that would affect others thinking or feeling.</p>
<p>Bulletin: White House considers using TARP for Detroit. I read this after I entered a premarket sell order for my QLDs. Made some nice coin on trading recently and I want to keep it. I thought that it would have been nice to see the article earlier but that’s life.</p>