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This presentation covers the key findings of the "Household Balance Sheet" section of our report on the State of Lending in America and it's Impact on U.S. Households.
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The State of Lending in Americaand its Impact on U.S. Households
America’s Household Balance Sheet
M William SermonsDecember 12, 2012
Strong consumer financial status is important for U.S. economy
Consumer spending is key element of US economic activity
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
1970 1980 1990 2000 2010
GDP
($Bi
llion
)
Annual GDP, Current Year and Real Dollars
Annual GDP, Current Year Annual GDP, Inflation Adjusted
Source: CRL Tabulations of Bureau of Economic Analysis data
Consumer Expenditures as a Percent of U.S. GDP
(average annual share)
1961-1970 61.8%
1971-1980 62.5%
1981-1990 64.6%
1991-2000 67.3%
2001-2010 70.0%
SOURCE: Organisation for Economic Co-operation and Development.
Many American families have littlefinancial breathing room
Typical household has just $100 left each month, after covering basic expenses, debt payments, etc.
Item Value ($)Yearly Income (less taxes and insurance/pension contributions) Annual non–discretionary expenses Housing (including upkeep and operation) Transportation Food Utilities Health Care Education (including reading) Other expenses (excluding alcohol, tobacco,
entertainment)Annual debt payments (excluding mortgage and auto) Discretionary annual income
$ 41,516
$ (37,651)(11,455)
(7,160)(5,596)(3,603)(3,068)
(594)(6,175)
($ 2,658)
$ 1,207
Reason #1: Declining incomes
• Happened even though workers increased productivity by 20%• African Americans and Latinos especially hard-hit because of job losses in
manufacturing and construction.
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2000 2002 2004 2006 2008 2010
Real Income
Median Income; $ 2010 Black Households Hispanic Households
Source: Current Population Survey, U.S. Census Bureau
Reason #2: Increasing cost of living
Many non-discretionary expenses (e.g. education, medical, utilities and housing) grew faster than inflation
0%10%20%30%40%50%60%70%80%
Increase in Nominal Household Spending
Source: Consumer Expenditure Survey, U.S. Bureau of Labor Statistics
Reason #3: Recession depleted assets
2001 2004 2007 2010
% of Families 93.4% 93.8% 93.9% 94.0%Value $34,400 $26,600 $30,200 $21,500
$0
$10,000
$20,000
$30,000
$40,000
0%
20%
40%
60%
80%
100%
Media
n Valu
e
% Fam
ilies H
olding
Asset
Asset Holding and Median Value ($2010), Financial Assets
Source: 2010 Survey of Consumer Finances Chartbook
2001 2004 2007 2010
% Families 67.7% 69.1% 68.6% 67.3%Value $151,300 $184,700 $209,500 $170,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
0%
20%
40%
60%
80%
100%
Med
ian Va
lue
% Fa
milie
s Hol
ding
Asse
t
Asset Holding and Median Value ($2010), Home Values
Source: 2010 Survey of Consumer Finances Chartbook
Values dropped for both household financial assets and homes - $7 trillion drop in home equity alone
Reason #4: More debt
Increases primarily in mortgages and student loans, with lower credit card balances and auto loans
2001 2004 2007 2010
% Families 75.1% 76.4% 77.0% 74.9%Value $47,700 $63,800 $70,600 $70,700
$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000
0%10%20%30%40%50%60%70%80%90%
100%
Me
dia
n V
alu
e
% F
amil
ies
Ho
ldin
g D
eb
tDebt Holding and Median Value (2010 $'s), Any Debt
Source: 2010 Survey of Consumer Finances Chartbook
Financial snapshot: 2007 vs. 2010
2007 2010Median household net worth
$126,400 $77,300
Families with credit card debt
46.1% 39.4%
Families with student loans
15.2% 19.2%
Median amount of home equity
$110,000 $75,000
Source: Federal Reserve Survey of Consumer Finances. All figures adjusted for inflation
Household wealth now down to pre-1995 levels
• 40% drop from 2007-2010• Wider wealth disparity between white and African–American or
Hispanic households
$-
$50,000
$100,000
$150,000
1995 1998 2001 2004 2007 2010
Median family net worth by race/ethnicity, 2010 $'s
All Families Non-white or Hispanic
Source: 2010 Survey of Consumer Finances Chartbook
Keys to rebuilding household balance sheets
• Promote access to safe and affordable credit
• Provide strong protections to prevent predatory lending practices
CRL’s State of Lending report offers our perspective on how to achieve these.
For More Information
See all CRL research: http://rspnsb.li/UpZetS
Contact us:Bill Sermons (DC): 202-349-1851
Kathleen Day (DC): 202-349-1871Graciela Aponte (CA): 510-379-5518Ginna Green (SC): 510-866-5989
