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 like homes, bank accounts and stocks, minus debts like mortgages and credit cards. It bottomed during the Great Recession at roughly $49 trillion in the first quarter of 2009.
Americans have been gradually recovering the wealth they lost to the recession. But it remains about 5 percent below its pre-recession 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 steadily shrinking their debt loads 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 had previously 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 after the recession.
The overall gain in Americans' net worth was driven by the biggest quarterly rise in the S&P 500 stock index in 14 years, though the index has since 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.
"It's a mixed outlook for the typical household," said Scott Hoyt, senior director of consumer economics at Moody's Analytics.
Consumers are more affected, Hoyt said, by other factors: a job market that's improving only fitfully, generally flat home values and gasoline that peaked near $4 a gallon in April but has since dropped to a national average of $3.56 a gallon.
Diana Leavengood, a freelance photographer and homeowner in the Tampa, Fla., area, says that for her family, higher costs for health care and other needs outweigh factors like a rising stock market. She and her husband and their children live frugally and have reduced their spending. But she says she still had to sell what was left of her stock portfolio recently to get by.
"Many things that five years ago we would not have thought twice about upgrading or fixing are now mended, and we make do," Leavengood said.
Though the S&P 500 remains 16 percent below its October 2007 peak, employees who have stayed invested in 401(k) plans and continued to contribute have benefited. About 94 percent of them now have more money in those accounts than before the market top 4½ years ago, according to the Employee Benefit Research Institute in Washington.
Paul Edelstein, director of financial economics for IHS Global Insight, said stock gains won't be a stable source of wealth generation for most U.S. households. He noted that the outlook for stocks is clouded by Europe's deepening debt crisis, slowing global growth and a looming political fight over the U.S. government's debt ceiling and expiring tax cuts and automatic spending cuts that could kick in at year's end.
The pickup in real estate values is a positive sign, Edelstein said.
"But with interest rates at rock-bottom levels, home prices unlikely to advance strongly and incomes growing anemically, there are few options right now for households to build their assets," he said.