- Associated Press - Thursday, June 7, 2012

CHICAGO — A burst of stock gains and the first rise in home values in six years helped Americans regain more of their wealth in the January-March quarter.

But since then, that effort has hit another bump. Stock prices sank in May on fears about Europe’s debt crisis and a weaker U.S. economy. That eroded the first quarter’s gains in wealth.

And there’s scant evidence of a sustained recovery in the housing market despite an uptick in home equity.

Household net worth rose 4.7 percent to $62.9 trillion last quarter, according to a Federal Reserve report released Thursday. The main reason was a 12 percent jump in the Standard & Poor’s 500 index, which padded the wealth of Americans who own stocks.

Home values increased 2.3 percent.

Household wealth, or net worth, is the value of assets including homes, bank accounts and stocks, minus debts such as mortgages and credit cards. It bottomed at roughly $49 trillion in the first quarter of 2009.

Americans gradually have been recovering the wealth they lost to the Great Recession, but it remains about 5 percent below its prerecession peak of $66 trillion.

The Fed report also found that:

• Americans’ borrowing rose at an annual rate of 5.8 percent in the January-March quarter. It was the first time consumers have boosted their borrowing by at least 5 percent in two straight quarters since mid-2008, just before the financial crisis.

• Household debt dipped 0.4 percent last quarter. Americans have been shrinking their debt loads steadily for the past four years.

• Home mortgage debt, which has been declining since 2008, fell an additional 2.9 percent. But the drop can be deceiving. Mortgage debt is falling mainly because many Americans have defaulted on payments and lost homes to foreclosure - not just because people are paying off loans.

• Corporate debt jumped 7.2 percent, the ninth straight increase. But corporations also boosted their cash stockpiles 0.7 percent to a near-record $1.74 trillion. Their rising cash levels reflect their wariness about expanding and hiring in an uncertain economy. (The Fed previously had estimated corporate cash at $2.2 trillion in the October-December quarter but has since updated its data.)

• Federal government debt grew at an annual rate of 12.4 percent. That was slower than all but two other quarters since the 2008 market meltdown. By contrast, state and local government debt declined at a 1.8 percent annual rate. This debt has been shrinking since 2010 as states and localities cut costs.

The overall gain in Americans’ net worth was driven by the biggest quarterly rise in the S&P 500 in 14 years, though the index since has shed about half that increase.

The surge in stocks didn’t help as many Americans as it would have in the past. The percentage of U.S. households that own individual stocks or stock mutual funds declined to 46 percent last year, down from 59 percent in 2001, according to the Investment Company Institute.

For most American households, home equity, not stocks, represents their main source of wealth.


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