Fed study: Recession easier on renters than owners

The most recent Federal Reserve Survey of Consumer Finance, which breaks down household compensation and net worth on the whole and across various demographic categories, shows that Americans lost both income and wealth from 2007 to 2010.

Falling home values played a part in this decline. Median net worth for home-owning families dropped from $246,000 to $174,500, a decrease of slightly more than 29 percent.

By comparison, median net worth of renters fell from $5,400 to $5,100, a 5.6 percent loss. However, financial gains and losses for renters are typically much smaller than those of home owners, authors of the Fed report noted.

“Renters have much lower median and mean net worth than homeowners in any survey year, so the dollar value of wealth losses for the renter group tended to be much smaller,” the analysts wrote.

They also explained that the housing collapse wasn’t the only factor that caused wealth to shrink. Assets of all kinds declined in value over that span while household debt essentially remained the same.

According to the Fed’s figures, the median net worth of U.S. households fell by 38.8 percent over that time span. Median income also dropped 7.7 percent.

“A substantial part of the declines observed in net worth over the 2007-10 period can be associated with decreases in the level of unrealized capital gains on families’ assets,” the report’s authors wrote.

“The share of total assets of all families attributable to unrealized capital gains from real estate, businesses, stocks, or mutual funds fell 11.6 percentage points, to 24.5 percent in 2010. Although the overall level of debt owed by families was basically unchanged, debt as a percentage of assets rose because the value of the underlying assets (especially housing) decreased faster.”