Who Has Benefited From the Stock Market Recovery

Since the economy and stock markets have been doing well, we have been told that the U.S. has recovered from the Great Recession. However, reaching new stock market highs and personally recovering from the losses sustained are two different things.

A recent study from the Joint Center for Housing Studies at Harvard evaluated how different groups of Americans weathered the storm and if they have regained their prior prosperity.

The analysis is broken down into several areas. Using broad numbers, real (after inflation) housing costs were down 9% between 2006 and 2016. This translates to a real and persistent wealth decline for many Americans. Of course, that assumes most Americans purchased their home at the top of the real estate bubble.

Meanwhile, foreclosure activity, had the least impact on retired families, whose rate of home ownership modestly declined from 81% in 2004 to 79% in 2017. However, for households in the 55 to 64 age bracket, the decline was more significant – down from 82% in 2004 to 75% in 2017. As a result, many people will reach retirement with little or no housing equity.

Lastly, the study found that 47% of renters were paying more than 30% of their incomes on housing costs.

The dramatic stock market gains are reflected in the value of IRA accounts. For example, traditional IRA assets were valued at $4.2 trillion in 2007 and increased to $6.9 trillion by the end of 2016. However, the study noted that stock market gains have been concentrated to the top third of wage earners as they own 87% of all stocks.

Despite the strong market results, account values were stagnant or slightly down, for middle-income Americans. Of the lowest income families, only 11% have any type of retirement account. The stock market boom has meant nothing to them.

The message is that ten years after the Great Recession, those who were already affluent have recovered just fine. But, lower- and middle-income American households did not recover as well and face a more uncertain economic future.