U.S. household wealth rises $1.3 trillion in second quarter

WASHINGTON Wed Sep 25, 2013 3:52pm EDT

A woman shops with her daughter at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking

A woman shops with her daughter at a Walmart Supercenter in Rogers, Arkansas June 6, 2013.

Credit: Reuters/Rick Wilking

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WASHINGTON (Reuters) - A rise in home and stock prices lifted U.S. household net worth to a record high in the second quarter, giving a hopeful sign for the nation's economy, Federal Reserve data showed on Wednesday.

Net worth rose $1.3 trillion to $74.8 trillion between April and June, with the value of residential real estate increasing by $525 billion and corporate equities and mutual funds up by around $300 billion over the period, the Fed said.

Increases in housing wealth make it easier for families to borrow against the equity in their homes, while overall wealth gains make consumers feel generally more comfortable spending their money. Many economists think consumers spend a few cents of every dollar they gain in wealth.

The finances of American families suffered tremendously during the 2007-09 recession, which lopped more than $13 trillion off their net wealth as a housing bubble burst and the stock market tanked.

To fight the recession, the Fed - the U.S. central bank - slashed interest rates and pumped trillions of dollars into the banking system. This helped turn around the housing and stock markets.

Household wealth only recovered its pre-recession high of $69 trillion in the third quarter of 2012.

In a possible sign that families could be nearing the end of a long deleveraging process, household debt rose by an annualized 0.2 percent in the second quarter, to $12.97 trillion.

That number has stabilized over the last several quarters, signaling that aggressive steps to pay down debt by households in the aftermath of the recession may have petered out.

The deleveraging had been a headwind for the economy, and a decisive change in borrowing could indicate a lasting improvement in household confidence in the outlook for the U.S. economy, which in turn should spur more spending, investment and hiring.

(Reporting by Alister Bull; Editing by Andrea Ricci and James Dalgleish)

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