A recent article in MoneyWatch had startling news regarding the average American’s wealth and financial recovery in years since the recession. Although housing prices have increased, and the stock market claims to be posting “all-time highs,” most Americans haven’t seen this kind of recovery. In fact, according to a report released by the Federal Reserve Bank of St. Louis, “the average U.S. household has recovered only 45 percent of the wealth they lost during the recession.”
What does this mean for families in Illinois? And is the housing crisis over in our state, or will we continue to see the effects of the recession in our neighborhoods and communities?
Rising Stock Prices and Wealthy Household Recovery
For most Illinois residents who were negatively affected by the housing crisis and the recession, financial recovery isn’t on the immediate horizon. This new report is especially disconcerting, as it comes on the heels of an earlier report that suggested that “Americans as a whole had regained 91 percent of their losses.” It turns out that this earlier, more promising figure is the result of an aggregation of household-net-worth data. A lot of this recovery in net worth is due largely to the stock market, which isn’t the source of wealth for most Americans. In fact, according to CBS News, it means that “most of the improvement has been a boon only to wealthy families.”
According to the St. Louis report, nearly two-thirds of the increase in aggregate household wealth is the result of rising stock prices. And what does this mean in terms of disproportionate household recovery? Approximately 80 percent of stocks are owned by “the wealthiest 10 percent of the population.” So, while financial figures show that American households, as a group, have regained $14.7 trillion between the time of the housing bust and the end of 2012, those numbers might be misleading. The majority of those households that have recovered these high dollars likely are homes with stockholders who are benefiting from rising stock prices, according to CBS News.
The Average American and the Limitations of Financial Recovery
Unlike the report indicating a 91 percent recovery of wealth losses, the grim figure reported in MoneyWatch takes into account inflation, and its adjusts accordingly. If MoneyWatch is right, average American households don’t own stocks, and they’re not benefitting from rising stock prices. While a small percentage of households may hold their wealth through stocks (those in the upper financial echelons), most of the total wealth for middle-class and low-income households stems from home values. And for most of these Americans, those home values are still “30 percent below their peak.”
In our state, and even in the Chicago area specifically, many homeowners are part of this middle- and lower-income household bracket. As such, many families in our state haven’t seen a whole lot of wealth recovery. And for some of them, there are still very real risks of home foreclosure and bankruptcy. For most of these families, paying down debt isn’t a realistic option in the current economy—jobs are still limited, and homeowners still owe substantial amounts in loans.
The MoneyWatch report emphasizes that paying down debt will be the only way for the average American household to begin to recover from the recession, and this includes mortgage debt.
If you have questions about home loans in Illinois or need help avoiding foreclosure, an experienced foreclosure defense lawyer can discuss your concerns with you today.
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