Americans’ net worth increased by 37% during the pandemic: How did this happen?

The covid-19 pandemic took a toll on the economy, and Americans were hit by record levels of inflation. Despite these developments, average net worth in the country surged by the inflation-adjusted figure of 37% in 2022 as compared to pre-pandemic numbers in 2019.

According to the Survey of Consumer Finances by the Federal Reserve, this is the biggest three-year rise since the Fed started conducting the triennial survey in 1989. The study measures income, net worth, debt, and home ownership, among other financial indicators.

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Government pandemic relief measures may have contributed to gains

The wealth gap between the rich and the poor also decreased slightly during the same period, according to the survey. Financial aid distributed by the government may have helped achieve the uptick in numbers.

As far as debt was concerned, the survey showed that levels did not change much from 2019 to 2022. Even as debt levels were unchanged, people were better equipped to pay for what they owed. The percentage of families who filed for bankruptcy dropped to 1.3% in 2022 from 2% in 2019.

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Homeownership and higher home prices raise net worth

Homeownership also saw some positive movement during the survey period. Almost two of three families owned homes last year, which is a slight increase from 2019. The value of homes rose during this time, which partly explains how household net worth increased by the percentage that it did.

However, high home prices have had an implication on others who are looking to buy, because the real estate market has become much less affordable. Houses have sustained their values, while mortgage rates continue to climb. Thirty-year fixed mortgage rates stand at 8% as of Oct. 18, which is more than double the average of 3.72% in January 2020.