Hit on the Middle Class: Summary of Family Finances

This continues our series on challenges facing the middle class
“The Federal Reserve Board’s Survey of Consumer Finances for 2010 provides insights into changes in family income and net worth since the 2007 survey. The survey shows that, over the 2007–10 period, the median value of real (inflation-adjusted) family income before taxes fell 7.7%; median income had also fallen slightly in the preceding three-year period. The decline in median income was widespread across demographic groups, with only a few groups experiencing stable or rising incomes.”
Family Assets

• Financial assets rose as a share of total assets, reversing an earlier trend
• Decline in the share of nonfinancial assets was most strongly driven by the decline in real estate prices and the value of business equity
• Homeownership rate continued to trend downward retracing the path to the level seen in 2001
• Declines in unrealized capital gains were an important part of the decrease in assets
• 24.5% decline total assets were attributable to unrealized capital gains a share more than 11% points below that in 2007

Family Debt

• Debt fell more slowly than assets over the recent three-year period
• Overall indebtedness as a share of assets rose markedly
• Home-secured debt fell slightly as a share of total family debt, but remained the largest component
• Families using credit cards for borrowing dropped over the period; the median balance on their accounts fell 16.1 percent, and the mean fell 7.8 percent
• Education-related borrowing increased as the fraction of families with education-related debt rose from 15.2% to 19.2%
• Mean balance among those with education debt rose 14.0%, the median by 3.4%
• Declining consumer loan interest rates helped offset the fact that debt rose relative to income for many families.
• Median ratio of loan payments to family income for debtors fell slightly over the period to 18.1%
• Debtors with loan payments exceeding 40% of their income decreased 1.0%
• Share of families with payment ratios this high peaked at 14.8%
• Fraction of debtors with any payment 60+ days past due climbed from 7.1% to 10.8%

Monday I will share my thoughts on the report of family finances