Congrats. You’re All Rich

I’m always hesitant to document increases in US household net worth.

In simple terms, the figures don’t represent what they purport to represent. Not really, anyway.

The media talks about “Americans’ wealth,” but in this context, we’re actually talking about the wealth of people who own assets. And because assets are concentrated in the hands of a relative few, “Americans” is a misnomer.

For example, while a sizable percentage of the populace owns a home, a sizable percentage doesn’t. Real estate values jumped $1.2 trillion in the second quarter, data out this week showed (figure below).

Ostensibly, that kind of price appreciation should serve as a powerful incentive for people to own homes. But this is where the story becomes a tragicomedy. The higher prices go, the less affordable they are.

The familiar “fear of missing out” dynamic often cited during inexorable stock market rallies may be present in the housing market, but even when cheap financing is available, coming up with a downpayment when prices are rising at a 20% annual clip is quite a bit harder than scraping together enough cash to jump aboard the equity bandwagon (unless it’s a share of Berkshire A you’re after).

Irony atop irony is the fact that cheap financing comes courtesy of the very same policies that are turbocharging the price increases in the first place (familiar figure below).

As Bloomberg put it, “for many renters, the sharp rise in housing prices pushed the reality of owning a home further out of reach.”

This is as simple as it is unfortunate.

The same linked article contains the following boilerplate nod to what, at this point, might as well be described as criminal levels of inequality: “But not everyone is benefiting from wealth gains.”

No, “everyone” surely isn’t “benefiting.”

As it turns out, people who control no wealth don’t participate in wealth gains. Every three months, when the latest Fed data on household net worth is released, we remind ourselves of that. As though it’s not a tautology.

The value of corporate equities rose $3.5 trillion in Q2. That brought the total appreciation since the pandemic crash to nearly $21 trillion (figure below).

The latest polling from Gallup suggested just over half of Americans own stock. The 56% figure based on polls conducted in April and July “is similar to the average 55% recorded in both 2019 and 2020, and the average of 55% Gallup has measured since 2009,” a recent summary read.

Gallup went on to note that “stock ownership was more common from 2001 to 2008 when an average 62% of US adults said they owned stock — but it fell after the 2007-2009 recession and has not fully rebounded.”

The demographic breakdown is familiar. Almost 90% of adults in households making $100,000 or more own stocks. The figure for households earning less than $40,000 is 24%.

Of course, the real injustice is captured by the concentration of equities. If you don’t know the numbers, you should. 10% of Americans own some 85% of the stocks.

The current Beltway bickering around Joe Biden’s efforts to expand the social safety net (and specifically, some Democrats’ opposition to parts of the plan) is further evidence to suggest this situation is never going to change.

Or at least not until it reaches some totally untenable breaking point beyond which the masses realize that a tiny handful of people can’t possibly suppress the collective will of 300 million.