by Calculated Risk on 12/09/2016 12:18:00 PM

The Federal Reserve released the Q3 2016 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth increased in Q3 compared to Q2:

The net worth of households and nonprofits rose to $90.2 trillion during the third quarter of 2016. The value of directly and indirectly held corporate equities increased $494 billion and the value of real estate increased $554 billion.

Household net worth was at $90.2 trillion in Q3 2016, up from $88.0 trillion in Q2 2016.

The Fed estimated that the value of household real estate increased to $22.7 trillion in Q3. The value of household real estate is now above the bubble peak in early 2006 - but not adjusted for inflation, and also including new construction.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  Household net worth, as a percent of GDP, is higher than the peak in 2006 (housing bubble), and above the stock bubble peak.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

This graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2016, household percent equity (of household real estate) was at 57.3% - up from Q2, and the highest since Q2 2006. This was because of an increase in house prices in Q3 (the Fed uses CoreLogic).

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 50+ million households with mortgages have far less than 57.3% equity - and about 3 million homeowners still have negative equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.

Mortgage debt increased by $86 billion in Q3.

Mortgage debt has declined by $1.21 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).

The value of real estate, as a percent of GDP, was up in Q3, and  is above the average of the last 30 years (excluding bubble).