The Federal Reserve Bank of New York reported last week that household debt increased $193 billion in the fourth quarter to a record-high $14.15 trillion, prompting some concerns about possible risks to the economic outlook from rising indebtedness.
A more complete look at household finances, however, tells a different story. Rising home valuations and a fourth-quarter surge in stock prices pushed household assets up by nearly $500 billion, or more than twice the increase in indebtedness. Household net worth is estimated to have risen to a record high of $16.3 trillion.
Moreover, the $10.1 trillion increase in household net worth over the past year is the largest on record.
Household financial conditions remain solid, providing support for economic growth and demand for commercial real estate in the year ahead.