By Harriet Torry
Americans' wealth pushed further into record territory in the final quarter of last year, hitting nearly $100 trillion thanks to rising stock markets and property prices.
Household net worth -- the value of all assets such as stocks and real estate minus liabilities like mortgage and credit-card debt -- rose more than $2 trillion last quarter to a record $98.746 trillion.
U.S. households also saw their net worth rise to nearly seven times their disposable personal income in 2017, swelling past earlier prerecession peaks.
The ratio of wealth to income is "at pretty dizzying levels right now," JPMorgan Chase economist Michael Feroli said.
What's more, the rate at which Americans are saving is "a little worrying," he said. The saving rate was 3.74% for 2017, down from 5.98% a year earlier and 7.19% in 2015.
Previous busts -- in the early and late 2000s -- were preceded by periods of rising asset values and low saving, and the current wealth-to-income level surpasses that seen in the run-up to earlier recessions.
Household wealth hit a level of just over six times disposable income in the first quarter of 2000, a year before the economy tipped into recession when a tech-stock bubble burst. Wealth touched 651.8% of disposable income in the first quarter of 2006, less than two years before the souring housing boom triggered a recession that began in December 2007.
However, household debt hasn't run up as fast in this cycle as it did in the 2000s, and stock valuations aren't as high this cycle as in the 1990s stock boom.
Thursday's report underscored the extent to which rising stock and real-estate prices are boosting household wealth, as the current economic expansion nears its ninth anniversary.
Stocks had a banner year in 2017, with the S&P 500 rising 19% and the Dow Jones Industrial Average gaining 25%. Household wealth in the stock market climbed by $1.346 trillion in the fourth quarter.
Meanwhile, the value of households' real estate increased $511.2 billion, reflecting continuing increases in home prices. U.S. house prices rose 1.6% in the fourth quarter, according to the Federal Housing Finance Agency's house price index, and rose 6.7% on the year.
In addition to the buffer from home equity, households also have $9.272 trillion in deposits, which include checking and savings accounts and certificates of deposit.
The quarterly Fed report, known as the flow of funds, presents its data only in aggregate, providing no details on how assets are distributed among households. It tracks the aggregate wealth of all U.S. households and nonprofit organizations, although nonprofits make up a relatively small proportion of household wealth. The figures aren't adjusted for inflation.
Separate data from the Fed suggests the gap between the wealthy and others has continued to widen in recent years. The share of wealth held by the top 1% rose to 39% in 2016, up from 30% in 1989, according to the Fed's survey of consumer finances, which is conducted every three years.
Household debts rose at an annual rate of 5.2% in the fourth quarter, with liabilities increasing by $208.6 billion. Borrowing has continued to climb even as the Fed has been gradually raising short-term interest rates, making mortgages, home-equity lines and other loans more expensive.
The central bank nudged its benchmark interest rate a quarter percentage point higher three times in 2017, to its current range between 1.25% and 1.5%.
Fed Chairman Jerome Powell in February said that "if you look at the financial-stability situation broadly, we do see some high asset prices."
"What we don't see is the buildup of leverage among households," he said in testimony to Congress, adding "the financial-stability picture shows at most modest risk."
Write to Harriet Torry at [email protected]