The Federal Reserve demonstrates that household wealth declined by $6.5 trillion from the end of 2019 to March 2020.
The loss stems from a sharp decline in stock prices and happened before unemployment increased to Great Depression level.
Throughout the first quarter, households experienced a wealth loss of $6.5 trillion. All of this came from a $6.9 trillion drop in financial assets, which was offset by gains in home equity at the same time.
As a result of the loss in stock market value, total household wealth dropped to 662.0% of after-tax income by the end of March––its lowest level since March 2016.
Families will likely slide deeper into debt, and, if they can’t pay their mortgage, could lose their house. Estimates based on weekly U.S. Census data demonstrate that approximately 12% of mortgagees did not pay or deferred their mortgage in May
One-in-six households have no or slight confidence they will make their mortgage payment next month. About one-in-five households have trouble or expect future trouble to pay their mortgage.
They could face default or foreclosure. While stocks have rebounded since their March selloff, the rest o the economy has entered into recession, if not depression, territory.
Job and income losses have ravaged wealth and savings of low-income and middle-income households, as transpired in the wake of the Great Recession.
Household debt, particularly expensive non-mortgage debt, will likely grow to new highs. House values, on the other hand, will likely fall. The middle class is in the process of taking a big and prolonged hit.