Household Net Worth and Consumer Spending Resilience
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The Fed just released its latest quarterly report on the balance sheet of households and nonprofit organizations, and the stunning magnitude of household net worth is one reason why consumer spending has remained resilient. Household net worth dipped modestly in 2025Q1 with the stock market correction, but remains staggeringly high, and with the stock market recovery and continued rise in residential home values, it likely will rise to another record high in Q2. Amid uncertain times, it continues to support consumer spending.
Real (inflation-adjusted) disposable personal income is the primary driver of consumption. Most households spend the vast majority of their DPI and save a small portion. Wage and salaries, the driving force of DPI, have benefited by increasing real wages and continued growth of employment. DPI has risen 36% since pre-Covid, materially faster than the cumulative 34% rise in the CPI.
Changes in household net worth--the value of real estate and financial assets, net of all debt--affect the propensity to spend disposable income. Increases in household net worth increase the propensity to spend disposable income (and reduce the rate of personal saving) while marked declines in household net worth lead households to more (spend less) and replenish their wealth. Workers who lose their jobs or incur losses in income draw down their savings to smooth their consumption, while others (particularly older people) "dissave" and spend on an array of goods and a lot of services.
A one (1) percentage point change in the rate of personal saving can have dramatic impact on the rate of growth of consumption, resulting in “sluggish” or “robust” consumption. The increases in household net worth in recent years has raised consumption and reduced the rate of personal saving, just the opposite of the years following the Great Financial Crisis, when households saved a higher portion of their DPI in response to the sharp declines in households’ financial wealth and the value of real estate (Chart 1). That period followed the pre-GFC period of soaring home prices and stock market, which fueled strong growth in consumption and low rates of saving.
The stunning magnitude of household net worth in the Fed’s quarterly report on the balance sheet of households and nonprofit organizations is one reason why consumer spending has remained resilient. Household net worth dipped modestly in 2025Q1, but remains staggeringly high, and with the recovery of the stock market and continued rise in residential home values, it likely will rise to another record high in Q2.
Chart 1. Rate of Personal Saving, % of DPI
The primary factor driving consumption is real (inflation-adjusted) disposable personal income. Most households spend the largest portion of their DPI and save a small portion. DPI is driven primarily by wage and salaries. Real wages and employment have continued to rise. DPI has risen 36% since pre-Covid, materially faster than the cumulative 34% rise in the CPI. Changes in household net worth--the value of real estate and financial assets--affect the propensity to spend disposable income. Some households occasionally draw down their savings to smooth their consumption, while others (particularly older people) "dissave" and spend on an array of goods and services.
Obviously, wealth is spread unevenly, as splashy headlines and data on the .1 percenters attest. However, the U.S. Census Bureau surveys reveal that a surprising number of households have accumulated a substantial amount of net worth (An estimated 18 million have household net worth exceeding $1 million.) In addition, between 40%-50% of household net worth is held by people 70 years old and older, and their assets are flowing into the economy through a number of channels, including charitable contributions, gifting and required distributions from retirement accounts (that are counted in disposable income).
A critical issue currently facing the economy is how will the imposition of tariffs hit consumption. The consensus is expecting a significant hit, associated with the higher inflation of tariffs and the negative impact on jobs and disposable income. Is it possible that the high level of household net worth will provide a buffer and mitigate the magnitude of any downturn?
Here's a few charts of the highlights of the report.
Household net worth declined in 2025Q1 by $1.6 trillion, but remains at a staggering $169.3 trillion (Chart 2). This is 7.6 times higher than the current level of disposable personal income of $22 trillion, well above its historical average and its average before the Covid pandemic (Chart 3). And DPI continues to grow significantly faster than inflation, reflecting primarily rising real wages and job gains (Chart 4).
Chart 2. Household Net Worth
Chart 3. Household Net Worth as a % of DPI
Chart 4. Disposable Personal Income
Of the total household net worth, $34.5 trillion is in residential real estate. Homeowner real estate value is $47.9 trillion and outstanding mortgage debt is $13.4 trillion (Chart 5). Home values have soared in the 2020s while the dollar amount of outstanding mortgages has risen only modestly. While the value of real estate holdings are a relative small share of total household net worth, some studies have shown that before the GFC, changes in real estate values had a much larger impact on consumption than a change in financial wealth of the same value.
The vast majority of the rest is wealth in financial assets, including stocks, bonds and privately-owned assets. The value of public equities held by households exceeds $65 trillion (Chart 6).
Chart 5. Real Estate Holdings and Mortgages
Chart 6. Equity Holdings
In addition, households hold a significant amount of liquid assets. As shown in Chart 7, households currently hold nearly $20 trillion in deposits, currency and money market fund shares. This represents a dramatic rise from their pre-pandemic level.
Chart 7. Deposits, Currency and Money Market Funds
To conclude, history shows that changes in household net worth are a significant factor driving the trajectory of consumer spending. In the current environment of high uncertainty generated by the imposition of tariffs and the erratic policymaking of President Trump, it’s important to include the wealth effect in any equation of consumer spending.
Mickey D. Levy
AuthorMore in Author Profile »Mickey Levy is a macroeconomist who uniquely analyzes economic and financial market performance and how they are affected by monetary and fiscal policies. Dr. Levy started his career conducting research at the Congressional Budget Office and American Enterprise Institute, and for many years was Chief Economist at Bank of America, followed by Berenberg Capital Markets. He is a Visiting Fellow at the Hoover Institution at Stanford University and a long-standing member of the Shadow Open Market Committee.
Dr. Levy is a leading expert on the Federal Reserve’s monetary policy, with a deep understanding of fiscal policy and how they interact. He has researched and spoken extensively on financial market behavior, and has a strong track record in forecasting. Dr. Levy’s early research was on the Fed’s debt monetization and different aspects of the government’s public finances. He has written hundreds of articles and papers for leading economic journals on U.S. and global economic conditions. He has testified frequently before the U.S. Congress on monetary and fiscal policies, banking and credit conditions, regulations, and global trade, and is a frequent contributor to the Wall Street Journal.
He is a member of the Council on Foreign Relations and the Economic Club of New York, and previously served on the Panel of Economic Advisors to the Federal Reserve of New York, as well as the Advisory Panel of the Office of Financial Research.
Dr. Levy holds a Ph.D. in Economics from University of Maryland, a Master’s in Public Policy from U.C. Berkeley, and a B.A. in Economics from U.C. Santa Barbara.
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