Some say the economy is on shaky ground. They point to high interest rates. They talk about inflation. They worry about a slowdown. But if you look at household wealth, you’d see a different story.
This week’s indicator, Household Real Estate vs. Household Equities, explains why. It tracks the two biggest sources of household wealth: real estate and stocks. The chart shows how much U.S. homes and household-owned stocks are worth over time. Right now, both are near record highs. As of Q3 2024, total U.S. housing wealth stands at $48.2 trillion, while the value of stocks owned by households has reached $46.3 trillion.
That’s a lot of money. And history tells us that when people feel richer, they spend more. Studies show that for every 1% increase in household wealth, consumer spending rises 0.4% the following year. This is called the wealth effect—the idea that rising asset values make people more confident about their finances, even if their income hasn’t changed.
The bottom panel of the chart tracks the year-over-year growth of these assets. Housing prices have cooled from their red-hot surge in 2020-2022 but are still up 6.6% over the past year. Meanwhile, household stock values have soared 28.8%, fueled by a strong stock market rally. The S&P 500 has now posted back-to-back 20%+ gains, something that’s only happened five times since 1927.
This explains why consumer spending hasn’t slowed, despite higher interest rates. Homeowners aren’t selling because they’re locked into low mortgage rates, keeping home prices steady. Stocks keep climbing, making investors wealthier. And instead of saving, people are spending. The personal savings rate is still below pre-pandemic levels, which tells us people aren’t holding onto cash—they’re putting it to work.
Could this change? Of course. If stock prices drop or home values take a hit, spending could slow. But right now, the indicator is clear: household wealth is rising, and that’s keeping the economy strong.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.