The Federal Reserve reported this week that the net worth of U.S. households plunged by 39% between 2007 and 2010. This was of, course, the period including the worst financial crisis and deepest recession since the 1930s. Still, the question remains: Can families recover their losses and, if so, how long will it take?
The answer is a conditional “yes”. Many families who suffered declines in their net worth because of the stock market’s drop have already recouped a sizable amount of their losses. Stock prices are still down about 10% from their 2007 level, but could make up that lost ground in another two to three years.
Where the loss in net worth was due to plunging home prices, as was the case for many households, recovery is likely to be much more prolonged. With home prices still down about 25% from the inflated 2007 levels, it could be another ten years before these prices restore that wealth segment.