Federal Reserve

BULLETIN

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Economic Background

Families' finances are affected by both their own decisions and the state of the broader economy. Over the 2007-10 period, the U.S. economy experienced its most substantial downturn since the Great Depression. Real gross domestic product (GDP) fell nearly 5.1 percent between the third quarter of 2007 and the second quarter of 2009, the official period of recession as determined by the National Bureau of Economic Research. During the same period, the unemployment rate rose from 5.0 percent to 9.5 percent, the highest level since 1983. Recovery from the so-called Great Recession has also been particularly slow; real GDP did not return to pre-recession levels until the third quarter of 2011. The unemployment rate continued to rise through the third quarter of 2009 and remained over 9.4 percent during 2010. The rate of inflation, as measured by the consumer price index for all urban consumers (CPI-U-RS), decreased somewhat over the period from an annual average of 2.8 percent in 2007 to 1.6 percent in 2010.

Financial markets moved dramatically over the three-year period. Major stock market indexes fell nearly 50 percent between September 2007 and March 2009, but about one-half of the losses in indexes such as the Dow Jones industrial average, the Standard & Poor's 500, and the Wilshire 5000 had been recouped by September 2010. Interest rates on new consumer loans generally fell; for example, the interest rate on a new 30-year fixed-rate mortgage averaged 6.38 percent in September 2007, when about one-half of the interviews for the 2007 survey had been completed, and the average rate was 4.35 percent three years later in September 2010. Yields fell dramatically on liquid deposits, time deposits, and bonds; for example, the rate on a three-month certificate of deposit (CD) fell from an average of 5.46 percent in September 2007 to 0.28 percent in September 2010.

Housing was of greater importance than financial assets for the wealth position of most families. The national purchase-only LoanPerformance Home Price Index produced by First American CoreLogic fell 22.4 percent between September 2007 and September 2010, by which point house prices were fully 27.5 percent below the peak achieved in April 2006. The decline in house prices was most rapid in the states where the boom had been greatest. For example, California, Nevada, Arizona, and Florida saw declines of 40 to 50 percent, while Iowa saw a decline of only about 1 percent. Homeownership rates fell over the period, in part because some families found it impossible to continue to afford their homes. By 2010, the homeownership rate was back down to a level last seen in the 2001 SCF, although that was still higher than in any previous SCF since at least 1989.

The Congress and the President responded to the economic situation with several legislative measures, some of which had an immediate effect on family finances, and some of which were intended to help prevent future crises. For example, in order to boost family after-tax incomes, the 2001 and 2003 income tax reductions originally scheduled to expire in 2010 were extended. In addition, employee payroll taxes earmarked for Social Security were reduced. In another move aimed at offsetting the decline in economic activity, the Troubled Asset Relief Program allowed government infusion of equity into stressed financial institutions. Lawmakers also responded to the economic crisis by attempting to curtail practices that disproportionately affected vulnerable consumers, practices that some argued had contributed to the crisis. Most notably, the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, contained prohibitions on certain lending practices and created the Consumer Financial Protection Bureau.

Several demographic shifts had important consequences for the structure of the population. The aging of the baby-boom population from 2007 to 2010 drove an 11.0 percent increase in the population aged 55 to 64. Overall population growth was about 2.7 percent, and, according to figures from the U.S. Census Bureau, 21.5 percent of that growth was due to net immigration. Also according to Census Bureau estimates, the number of households increased 1.2 percent--below the 2.3 percent rate of household formation between 2004 and 2007. With the population growing more rapidly than household formation, the average number of persons per household rose slightly from 2.59 people in 2007 to 2.63 in 2010.

The vast majority of interviews for the 2010 SCF were completed in 2010, but some were completed in early 2011. Thus, the survey data are largely unaffected by changes in economic activity since 2011--in particular, the rise in the market price of corporate equities, the relative stabilization of house prices, and the start of a decline in the unemployment rate.

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Income

The change in real before-tax family income between 2007 and 2010 diverged sharply from the patterns seen in recent surveys.⁴ Both median and mean income fell sharply, though the drop in the median (7.7 percent) was smaller than the drop in the mean (11.1 percent) (table 1).⁵ Over the preceding three-year period, the median had been basically unchanged, and the mean had risen 8.5 percent. The changes for both periods stand in stark contrast to a pattern of substantial increases in both the median and the mean dating to the early 1990s.

Underlying the recent change was a shift in the composition of income between 2007 and 2010 (table 2). The share of family income attributable to realized capital gains fell from 6.7 percent in 2007 to only 0.9 percent in 2010; income from businesses, farms, and self-employment accounted for only 12.2 percent of income in 2010, down from 13.6 percent in 2007.

Offsetting these declines in shares, the share of income from wages and salaries rose 3.6 percentage points; that of Social Security, pension, or other retirement income rose 2.4 percentage points; and that of transfers or other income rose 1.3 percentage points. The share of income from interest or dividends was little changed. The decline in the share of capital gains was largest among the wealthiest 10 percent of families. As shown in the table, wage income tends to be a smaller factor for the highest wealth group.

Some patterns of income distribution hold generally across the years of SCF data shown in table 1.⁶ Across age classes, median and mean incomes show a life-cycle pattern, rising to a peak in the middle age groups and then declining for groups that are older and increasingly more likely to be retired.

Couples (families in which the family head was either married or living with a partner) tend to have higher incomes than single persons, in part because couples have more potential wage earners. Income also shows a strong positive association with education; in particular, incomes for families headed by a person who has a college degree tend to be substantially higher than for those with any lesser amount of schooling. Incomes of white non-Hispanic families are substantially higher than those of other families.⁷ Families headed by a self-employed worker consistently have the highest median and mean incomes of all work-status groups. Families headed by a person in a managerial or professional occupation have higher incomes than families in the three remaining occupation categories. Income is also higher for homeowners than for other families, and it is progressively higher for groups with greater net worth.⁸ Across the four Regions of the country as defined by the Census Bureau, the ordering of median incomes over time has varied, but the means generally show higher values for the Northeast and the West than for the Midwest and the South. Finally, families living in metropolitan statistical areas (MSAs), which are relatively urban areas, have higher median and mean incomes than those living in rural areas.⁹

Income by Demographic Category

Across the income distribution between 2007 and 2010, only the lowest quintile did not experience a substantial reduction in median income; the median for that group rose $500.¹⁰ For other groups, the median decreased between 5.3 percent and 8.9 percent between 2007 and 2010. Similarly, for all income groups except the lowest quintile, the direction of changes in mean income was uniformly negative, with decreases ranging from a 5.8 percent drop for the second-highest decile to a 16.2 percent drop for the top decile. The disproportion between changes in median and mean incomes for the top decile (a 5.3 percent drop in the median, compared with a 16.2 percent decline in the mean) establishes a theme that is repeated for income changes for many other groups considered in this article. Often, such a difference between the changes in a median and a mean is taken to indicate relative compression of higher values in the distribution.

The decline in mean incomes in the top decile between 2007 and 2010 stands in stark contrast to the generally steady pattern of rising mean incomes at the top of the income distribution over the past two decades. Indeed, the only other decreases in mean income observed for the top decile occurred in the periods 1989 to 1992 and 2001 to 2004, when the recovery from earlier recessions was affecting families broadly.

Every age group less than 55 saw decreases in median income of between 9.1 and 10.5 percent, while families headed by a person between 65 and 74 or 75 or more saw increases at the median. In contrast to the changes at the medians, the means fell for all age groups but especially for the 65-to-74 age group (a decline of 21.7 percent). In almost every age group, the decline in the mean was greater than the decline in the median.

By family structure, median incomes declined over the 2007-10 period for all groups, but most notably (negative 14.1 percent) for childless single families (those headed by a person who was neither married nor living with a partner) headed by a person aged less than 55; median income fell the least (2.3 percent) for single families with children. Mean income also fell for most types of families, except childless single families headed by a person aged 55 or older, for whom it rose 3.1 percent. Mean income of childless couples fell the most of all families, when grouped by family structure (15.6 percent).

In 2010, both median and mean incomes rose substantially with educational attainment, with incomes among the group holding a college degree being more than three times as high as among those with less than a high school diploma, and at least twice as high as among those with only a high school diploma. Between 2007 and 2010, however, the decreases in incomes were much larger for the higher education groups, and mean income actually rose for the no-high-school-diploma group (albeit from the much lower starting point). This pattern of change reversed the relatively faster growth of mean income for higher-educated families that had occurred between 2004 and 2007.

Over the 2007-10 period, the median income for white non-Hispanic families fell 2.6 percent, and the mean fell 11.3 percent. In contrast, the median for nonwhite or Hispanic families fell 10.4 percent, while the mean fell 3.2 percent. However, both the median and the mean values for nonwhites or Hispanics in both years were substantially lower than the corresponding figures for non-Hispanic whites. Since 1998, the total gain in median income for nonwhite or Hispanic families was 11.3 percent, whereas it was 3.9 percent for other families; the gain in the mean over this period was larger for both groups--22.8 percent for nonwhite or Hispanic families and 14.1 percent for other families.¹¹

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Median income fell 5.7 percent from 2007 to 2010 for families headed by a person who was working for someone else, but it fell much more (18.7 percent) for those who were self-employed; the median rose 12.4 percent for the retired group and 12.2 percent for the other-not-working group.¹² The mean over this period fell for all groups, especially for the self-employed group (a decrease of 25.4 percent) and the retired group (a decrease of 17.0 percent). Over the previous three years, median incomes had fallen for the retired and the other-not-working groups but had risen for the two worker groups.

Across occupation groups, median income fell most in proportional terms (9.3 percent) for families headed by a person working in a technical, sales, or service job. Although the percentage drop for families headed by a person in a managerial or professional position was only slightly smaller (9.1 percent), the dollar amount of their decline was much larger because their 2007 median income was much higher. For the other-occupation group, a group that predominantly comprises workers in traditional blue-collar occupations, the median fell only 3.3 percent. Consistent with evidence for age or current-work-status groups, median income for families headed by retirees increased 10.0 percent. In contrast, mean income decreased for all occupation groups, but especially for the technical, sales, or service occupation groups, for whom the mean fell 16.0 percent, and for the retired and other-not-working group, for whom the mean fell 16.3 percent.

By Region, median family incomes in the Northeast and the Midwest were little changed between 2007 and 2010, while the medians in the West and the South decreased substantially. Those changes in medians stand in contrast to what occurred during the period from 2004 to 2007, when median incomes fell in the Northeast and Midwest but increased in the West and South. These income changes by Region mirror the Regional pattern of home price changes across the two time periods. During the final years of the housing boom, which disproportionately affected the West and South, median incomes were rising in those Regions but falling elsewhere. During the subsequent housing bust, which also disproportionately affected those areas, median incomes were falling there but rising elsewhere. Mean incomes declined across all four Regions between 2007 and 2010, though the changes were largest for the South and West.

In the recent three-year period, families living in an MSA saw a 7.6 percent decline in median income, while those living in other, less urbanized areas saw a decrease of 2.9 percent. Mean income also fell for both types of area--by 11.3 percent for families living in an MSA and by 8.4 percent for those living in other areas.

By housing status, median and mean incomes fell from 2007 to 2010 both for homeowners and for other families. The percentage decrease in median income for homeowners (7.7 percent) matched the percentage decrease in the overall family median reported earlier (7.7 percent), while the decrease for renter and other families (10.3 percent) was greater. Mean income declined for both groups, but particularly for homeowners--11.2 percent for homeowners, versus 3.6 percent for other families. As noted later in this article, homeownership continued the decline that began between the 2004 and 2007 surveys after rising for several years prior to that.¹³

By percentile of net worth, median income fell for every group, with the smallest decline occurring for the top 10 percent of wealth holders, for whom income fell 1.4 percent. The decline in median income was also relatively small for the lowest quartile, for which the median fell 3.7 percent; the median declined most for the middle income groups (12.1 percent for the second quartile, 7.7 percent for the third quartile, and 13.6 percent for the group between the 75th and 90th percentiles).¹⁴ The pattern of changes in the mean by net worth group was somewhat different, with mean income in the bottom quartile rising 6.9 percent and the mean income in the top decile falling 18.2 percent. This differential pattern may be attributable in part to composition effects. For example, some families with incomes sufficient to support a relatively large home mortgage may have lost enough of their home equity over the three-year period for them to have been pushed into the lowest wealth group, where their incomes would be relatively large.

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Income Variability

For a given family, income at a particular time may not be indicative of its "usual" income. Unemployment, a bonus, a capital loss or gain, or other factors may cause income to deviate temporarily from the usual amount. Although the SCF is normally a cross-sectional survey, it does provide some information on income variability. In 2010, 25.3 percent of families reported that their income for the preceding year was unusually low, whereas only 14.4 percent of families had reported unusually low income in 2007. In contrast, only 6.0 percent of families reported that their income was unusually high, down from 9.2 percent in 2007 (data not shown in the tables). For those reporting unusual income in either direction, the median deviation of actual income from the usual amount was negative 27.4 percent of the normal level; the same statistic was negative 22.0 percent in 2007.

Although a family's income may vary, such variability may be a well-recognized part of its financial planning. The SCF data over the recent three-year period show some increase in the families' uncertainty about their future income. In 2010, 35.1 percent of families reported that they did not have a good idea of what their income would be for the next year, and 29.0 percent reported that they do not usually have a good idea of their next year's income. The corresponding figures for 2007 were lower, at 31.4 percent and 27.2 percent, respectively.

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Saving

Because saving out of current income is an important determinant of family net worth, the SCF asks respondents whether, over the preceding year, the family's spending was less than, more than, or about equal to its income. Though only qualitative, the answers are a useful indicator of whether families are saving. Asking instead for a specific dollar amount would require much more time from respondents and would likely lower the rate of response to the survey.

Overall, from 2007 to 2010, the proportion of families that reported that they had saved in the preceding year fell substantially, from 56.4 percent to 52.0 percent. That decrease pushed the fraction of families reporting saving to the lowest level since the SCF began collecting such information in 1992. The general pattern of changes across demographic groups in the recent three-year period is also one of decline, as retirees were the only group reporting an increase in the fraction that saved.

Estimates of the personal saving rate from the national income and product accounts (NIPA) show an annual saving rate of 5.3 percent between 2008 and 2010, up substantially from the 2.2 percent rate over the 2005-07 period. This divergence in trend arose in part because the SCF and NIPA concepts of saving differ in some important ways. First, the underlying SCF question asks only whether the family's spending has been less than, more than, or about the same as its income over the past year. Thus, while the fraction of families saving may be smaller, those who are doing so may be saving a relatively large amount; those who are spending more than their incomes may be spending a relatively small amount. Second, the NIPA measure of saving relies on definitions of income and consumption that may not be the same as those that respondents had in mind when answering the survey questions. For example, the NIPA measure of personal income includes payments employers make to their employees' defined-benefit pension plans but not the payments made from such plans to families, whereas the SCF measure includes only the latter. The SCF measure also includes realized capital gains, whereas the NIPA measure excludes such gains.

A separate question in the survey asks about families' more typical saving habits. In 2010, 6.0 percent of families reported that their spending usually exceeds their income; 19.6 percent reported that the two are usually about the same; 34.8 percent reported that they typically save income "left over" at the end of the year, income of one family member, or "unusual" additional income; and 39.6 percent reported that they save regularly (data not shown in the tables). These estimates show a small decrease between 2007 and 2010 in the share of families who reported regular saving, but in general, the fact that these figures are not much changed over the past several surveys suggests that economic conditions over this period had only modest effects on the longer-run saving plans of families.

The SCF also collects information on families' most important motivations for saving (table 3).¹⁵ In 2010, the most frequently reported motive was liquidity related (35.2 percent of families), a response that is generally taken to be indicative of saving for precautionary reasons, and the next most frequently reported response was retirement related (30.1 percent of families).¹⁶ At least since 1998, these two responses have been most frequently reported, but saving for retirement was marginally more likely to be reported than saving for liquidity, until the 2010 survey. Education-related motives also appear to be important, but less so than in 2007; in 2010, 8.2 percent of families reported it as their primary motive, down only slightly from 2007 but down 3.4 percentage points since 2004. The frequency of reporting saving for purchases rose 1.5 percentage points from 2007 to 2010 to a level 3.8 percentage points above that in 2004.

The survey asks families to estimate the amount of savings they need for emergencies and other unexpected contingencies, a measure of desired savings for precautionary purposes.¹⁷ The desired amount increases with income, but as shown by the following table, the amount is a similar percentage of usual income across levels of such income:

Overall, the amount of such desired savings was little changed from 2007, but it rose overall and for most income groups as a percentage of usual income, largely because usual income fell over the recent three-year period (data not shown in the tables).

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Net Worth

Movements in the dollar value of families' net worth are, by definition, a result of changes in investment, valuation, and patterns of ownership of financial assets (tables 5, 6, and 7) and nonfinancial assets (tables 8, 9, and 10), as well as decisions about acquiring or paying down debt (tables 11 through 17). A variety of financial decisions underlie these changes. Box 3, "Shopping for Financial Services," provides a discussion of the intensity of families' decisionmaking efforts and their sources of financial information.

By age group, median and mean values of family net worth generally increase with age, though there are some signs of decrease among older age groups. This pattern reflects both life-cycle saving behavior and a historical pattern of long-run growth in inflation-adjusted wages. The median and mean values of wealth rise in tandem with income, a relationship reflecting both income earned from assets and a higher likelihood of substantial saving among higher-income families. Wealth shows strong differentials across groups defined in terms of family structure, education, racial or ethnic background, work status, occupation, housing status, and the urbanicity and Region of residence; these differentials generally mirror those for income, but the wealth differences tend to be larger.

Net Worth by Demographic Category

Analysis by demographic group for the 2007-10 period shows a pattern of substantial losses in median and mean net worth for most groups, but a small number of groups experienced gains. Most groups saw declines in the median that far exceeded declines in the mean.

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Median net worth fell for all percentile groups of the distribution of net worth, with the largest decreases in proportional terms being for the groups below the 75th percentile of the net worth distribution. From 2007 to 2010, the median for the lowest quartile of net worth fell from $1,300 to zero--a 100 percent decline; at the same time, the mean for the group fell from negative $2,300 to negative $12,800. For the second and third quartiles, the median and mean declines in net worth were smaller but still sizable; for example, median net worth for the second quartile fell 43.3 percent. Median and mean net worth did not fall quite as much for the higher net worth groups. For the 75th-to-90th percentile group, the median fell 19.7 percent while the mean fell 14.4 percent. For the wealthiest decile, the 11.0 percent decline in the mean exceeded the 6.4 percent decline in the median for that group; as was discussed earlier in the case of family income, this pattern of the changes in the median and mean suggests that there was some compression of higher values in the wealth distribution.

Over the recent three-year period, median net worth decreased for all income groups except the top decile, for which it was basically unchanged; mean net worth fell substantially for all of the groups except the lowest quintile, for which mean wealth rose 5.9 percent. The broad middle of the income distribution (the groups between the 20th and 90th percentiles) saw consistently large drops in median net worth between 2007 and 2010, with much smaller drops in mean net worth within those income groups. In contrast to the stability of the median for the top decile, the mean for that group was down 15.3 percent over the recent three-year period.

The opposing pattern of a 27.1 percent decline in median net worth for the lowest income quintile and a 5.9 percent increase in the mean for the group differs from the patterns seen for the other groups. To some extent, this finding reflects composition effects. Box 2, "Cross-Sectional Data and Changes in Group Composition over Time" provides an example of how income-related composition affects median net worth across income groups.

The survey shows substantial declines in median and mean net worth by age group between 2007 and 2010, with the exception that mean net worth rose modestly (1.3 percent) for the 75-or-more age group. The 35-to-44 age group saw a 54.4 percent decline in median net worth during the most recent three-year period, and the mean for that age group fell 36.4 percent. The wealth decreases for the less-than-35 age group were also large; the median fell 25.0 percent while the mean fell 41.2 percent. The declines in median and mean net worth for middle-aged families (the 45-to-54 and 55-to-64 age groups) were also large.

By family structure, single families headed by a person younger than 55 with no children and couples with children (who also tend to be relatively young) had the largest drops in wealth from 2007 to 2010 in median net worth--declines of 44.5 percent and 41.2 percent, respectively. Single families with children and families headed by a single person who was aged 55 or older and without children also experienced large decreases in median net worth--36.5 percent and 32.3 percent, respectively. Mean net worth fell for all family structure groups as well, though the extent of the decreases ranged from 4.2 percent (childless families headed by a single person aged 55 or older) to 45.9 percent (other childless families headed by a single person).

From 2007 to 2010, median and mean net worth decreased for all education groups. Mirroring the pattern for all families, each of the four education groups experienced a very large decline in the median (ranging from a drop of 53.7 percent for the no-high-school-diploma group to a drop of 32.7 percent for the high-school-educated group) and smaller declines in the mean (ranging from 29.2 percent for the some-college group to a drop of 15.3 percent for the college-educated group). The patterns of changes in medians and means across education groups are similar to those for the income groups, largely because income and education are strongly correlated.

The data show losses from 2007 to 2010 in median and mean wealth for both categories of race or ethnicity. Declines in the median were roughly the same for white non-Hispanic families (27.2 percent) and for nonwhite or Hispanic families (31.3 percent).¹⁹

However, the decline in the mean was much smaller for white non-Hispanic families--10.0 percent--than the decline for nonwhite or Hispanic families--26.8 percent. Among nonwhite or Hispanic families, the subgroup of African American families saw a decline of 13.3 percent in their median net worth from 2007 ($17,900) to 2010 ($15,500), and their mean net worth fell 30.4 percent, from $140,800 to $98,000; over the 2004-07 period, the median for the group had fallen 23.9 percent, while the mean had risen 10.6 percent (data not shown in the tables).

From 2007 to 2010, median and mean net worth fell among all work-status groups except one. The exception was families headed by persons who were not working, for reasons other than retirement (the other-not-working group), which showed increases in both measures (albeit from relatively low starting points); in both years, the group had the lowest levels of both median and mean net worth of all work-status groups. The dollar amounts of decreases in median and mean net worth for the self-employed group were far larger than those for the other groups that experienced losses over the period; in percentage terms, however, the decreases for this group in both median and mean wealth were well below the rates of decline for families headed by a person working for someone else.

Median and mean net worth decreased for all occupation groups in the recent three-year period, but they did so most markedly for families headed by a worker in a technical, sales, or service occupation, for whom median net worth fell 57.7 percent and mean net worth fell 32.8 percent. Wealth losses were substantial for every other occupation group as well, however, with median declines ranging from 35.4 percent (managerial and professional group) to 31.0 percent (retired group), and mean declines ranging from 19.1 (other-occupation group) to 10.9 percent (managerial and professional group).

Between 2007 and 2010, median net worth fell dramatically for families living in all Regions of the country, but especially for those living in the West--a 55.3 percent decline. This pattern reflects the effect of the collapse of housing values in several parts of the West Region. Median wealth in every other Region fell 28.2 percent or more. As with the overall population and most other demographic groups discussed earlier, the decline in mean net worth within every Region was smaller than the drop in the median. In the South and Midwest Regions, the percentage decline in the median was about twice as large as the percentage decline in the mean, but in percentage terms, the median for the West fell four times as much as the mean.

By urbanicity of the place of residence, in the recent three-year period, median net worth fell much more dramatically in MSA areas than in non-MSA areas, but the declines in the means were more similar. The decline in median net worth in MSA areas was large enough to erase most of the widening gap that had developed since 1998, in large part due to a run-up in house values. Mean net worth remained much higher in MSA areas than in non-MSA areas in 2010.

As might be expected from the previous discussion on the role of the decline in housing values in explaining median and mean wealth losses across various demographic groups, there are large differences in net worth changes by housing status. Median net worth for homeowners fell 29.1 percent between 2007 and 2010, while the mean fell 12.7 percent. The decline in median net worth for non-homeowners (hereafter, renters) was only 5.6 percent, though the decline in the mean was much larger at 23.4 percent. Renters have much lower median and mean net worth than homeowners in any survey year, so the dollar value of wealth losses for the renter group tended to be much smaller; for example, the median net worth of renters fell $300 over the three-year period, in contrast with $71,500 for homeowners.

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Assets

At 97.4 percent in 2010, the overall proportion of families with any asset was barely changed from 2007 (first half of tables 9.A and 9.B, last column). Overall, this figure has declined 0.3 percentage point since 2007 (data not shown in the tables). Across demographic groups, the pattern of changes in the recent three-year period is mostly one of small increases or decreases. Noticeable exceptions are declines for the following groups: the second quintile of the income distribution (0.9 percentage point), families headed by a person aged less than 35 (1.6 percentage points) or between 65 and 74 (1.3 percentage points), families headed by a person with a high school diploma (1.2 percentage points), and families in the bottom quartile of the net worth distribution (1.2 percentage points). For many groups, the figure remained at or near 100 percent.

From 2007 to 2010, median assets for families having any assets fell 19.3 percent, from $232,100 to $187,200 (second half of tables 9.A and 9.B, last column), and the mean fell 12.8 percent, from $702,100 to $612,300 (memo line). The percentage change in median assets between 2007 and 2010 is only about half the percentage change in median net worth reported in table 4, in part for reasons related to housing. Because houses are frequently mortgaged, net equity in homes tends to be smaller than the asset value of the home itself; consequently, a given change in housing values will tend to have an amplified proportional effect on net worth changes relative to the change in value as a proportion of gross assets.

Across net worth groups, the percentage changes in median assets and net worth were most similar for families in the highest or lowest quartiles of the distribution of net worth. For the wealthier groups, housing tends to be a smaller share of net worth, and it is less likely to be mortgages than is the case for the middle wealth groups. For the least wealthy group, homeownership is much less common than for other groups. The divergence between fluctuations in median asset change and median net worth change is largest for the middle two quartiles, whose net worth tends to be dominated by housing. A similar effect shows up across income groups, as middle-income families experienced smaller declines in median assets than in median net worth, in part because they are more likely to be leveraged homeowners whose assets are dominated by housing. Across other demographic groups such as age, race or ethnicity, and education, the percentage declines in median assets are generally about half the percentage decline in median net worth. Not unexpectedly, such divergence of changes in wealth and assets was largest for homeowners, whose median assets fell 18.0 percent, well below their decline in median net worth of 29.1 percent; for renters, in contrast, median assets fell 11.3 percent, which is greater than their 5.6 percent decline in median net worth.

Financial Assets

Although median and mean financial assets declined from 2007 to 2010, financial assets as a share of total assets rose 3.9 percentage points to 37.9 percent (table 5, memo line); this movement reverses a decline in this share from a level in 2001 that marked the high point observed in the survey since at least 1989. The share of financial assets in total assets had fallen 8.2 percentage points between 2001 and 2007. The relative shares of various financial assets also shifted. The decline in the percentage share of directly held stock was mostly offset by increases in the shares of transaction and retirement accounts.²⁰ The share of financial assets held in retirement accounts has nearly doubled since 1989, and as of 2010, it stood at 38.1 percent of families' financial assets (data not shown in the tables).

Across the groups considered, the 94.0 percent rate of ownership of any financial asset in 2010 was almost unchanged over the recent three-year period (first half of tables 6.A and 6.B, last column).

Changes in ownership rates were also generally small across demographic groups, though there are a few exceptions. By age, families in the less-than-35 group saw a 2.1 percentage point increase in their financial asset ownership rate, while those in the 55-to-64 group saw a 2.0 percentage point decline; by family structure, ownership increased 4.3 percentage points for single families with children but declined 2.7 percentage points for childless single families headed by someone 55 or older; and by work status, ownership fell 1.6 percentage points for families headed by a person who was self-employed. Ownership increased for nonwhite or Hispanic families and for white non-Hispanic families. The share of homeowners with financial assets fell 0.4 percentage points, but the ownership rate for renters rose 1.8 percentage points.

Although the overall ratio of financial assets to total assets rose over the recent period, that increase is attributable to the relatively larger declines in the value of nonfinancial assets; the median holding of financial assets for families having such assets fell 28.8 percent, while the mean fell 3.3 percent. The recent change in the median erased the gains experienced in the previous three-year period (2004 to 2007) and left median financial assets at their lowest level since the 1995 survey (data not shown in the tables). The decline in median financial asset holdings was widespread across demographic groups, with gains observed for families headed by someone 75 or older, the top 10 percent of families ranked by income, and the top 10 percent of families ranked by net worth.

Transaction Accounts and Certificates of Deposit

In 2010, 92.5 percent of families had some type of transaction account--a category comprising checking, savings, and money market deposit accounts; money market mutual funds; and call or cash accounts at brokerages. The increase of 0.4 percentage point in ownership since 2007 continued the general upward trend seen in recent surveys; the ownership rate is now 1.9 percentage points higher than in 1998 (data not shown in the tables). Families that did not have any type of transaction account in 2010 were disproportionately likely to have incomes in the lowest income quintile, to be headed by a person younger than age 35, to be nonwhite or Hispanic, to be headed by a person who was neither working nor retired, to be renters, or to have net worth in the lowest quartile. See box 4 "Decisions about Checking Accounts" for a discussion of the reasons families do or do not have a checking account. Over the 2007-10 period, transaction account ownership rose noticeably--between 2.2 and 4.1 percentage points--for single families with children, families headed by a person in the other-not-working work-status group, and families in the bottom quartile of the net worth distribution.

The slight overall expansion in ownership of transaction accounts in the recent three-year period is reflected in the mostly offsetting changes in the types of transaction account held by families. Ownership of checking and savings accounts rose, while ownership of money market accounts declined and that of call accounts was basically unchanged, as shown in table 6.1:

 

The savings account category includes a relatively small number of tax-preferred accounts such as medical or health savings accounts and Coverdell or 529 education accounts.²¹ Ownership of any of these types of tax-preferred accounts decreased from 3.8 percent in 2007 to 2.9 percent in 2010 (data not shown in the tables). In both of the two years, 529 plans accounted for about 80 percent of the number of these tax-preferred savings accounts, up from 71 percent in 2004.

Median holdings in transaction accounts for those who had such accounts fell 16.7 percent from 2007 to 2010, while the mean rose 17.0 percent. The decline in median transaction account balances was widely observed across demographic groups, but there were noticeable exceptions for childless single families headed by someone aged 55 or older, families headed by individuals who reported their current work status as retired, families in the 75-or-older age group, and families in the highest decile of the net worth distribution. Indeed, within the highest decile of net worth, median transaction balances rose from $48,700 to $60,800, an increase of 24.8 percent. The increase in the already substantial holdings of highly liquid and secure transaction account balances among this group of wealthy families is a key to understanding the rise in the overall mean transaction account balances while the overall median fell.

Certificates of deposit--interest-bearing deposits with a set term--are traditionally viewed as a low-risk saving vehicle, and they are often used by persons who desire a safe haven from the volatility of financial markets. Over the 2007-10 period, the attractiveness of CDs was subjected to competing forces, two of which seem particularly powerful. Increased volatility in stock and bond markets made CDs more attractive relative to those investments as a haven from risk, but the convergence of yields on all relatively safe assets at a level near zero implied that the advantage CDs typically hold over transaction accounts was greatly reduced. The net result of these and other factors is that CD ownership fell 3.9 percentage points between 2007 and 2010, and the median balance held in CDs among those owning them fell 4.8 percent; at the same time, the mean holdings rose 24.5 percent. The decline in ownership rates was widespread, with the self-employed being the only demographic group to show an increase in the ownership rate. However, the growth in median balances across demographic groups was more diverse; notable increases in median balances were observed for the highest decile of the net worth distribution, families in the Midwest Region, families headed by a person who was self-employed, families with incomes between the 40th and 90th percentiles of the income distribution, and families headed by a person who did not have any college education.

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Savings Bonds and Other Bonds

Savings bonds are owned disproportionately by families in the highest 40 percent of the income distribution and by families in the top half of the distribution of net worth. Over the 2007-10 period, the ownership of savings bonds declined 2.9 percentage points to 12.0 percent overall, and it fell for virtually all demographic groups. The drop in ownership between 2007 and 2010 continued a general downward trend observed in the SCF for some time; in 1998, 19.3 percent of families owned savings bonds (data not shown in the tables). Median holdings were unchanged over the recent three-year period, but the mean fell 11.6 percent.

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Other bond types tend to be very narrowly held, and the ownership rate was unchanged from 2007 at 1.6 percent in 2010.²² As shown in the following table, the proportion of families that owned tax-exempt bonds or corporate or foreign bonds increased slightly in the recent period, while ownership of other types of bonds declined slightly:

Ownership of any type of bond other than savings bonds is concentrated among the highest tiers of the income and wealth distributions, and these groups saw little change in ownership from 2007 to 2010. The median value of holdings of such bonds for families that had them rose 63.5 percent over this period, while the mean rose 2.2 percent.

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Publicly Traded Stock

The direct ownership of publicly traded stocks is more widespread than the direct ownership of bonds, but, as with bonds, it is also concentrated among high-income and high-wealth families. The overall share of families with any such stock holdings declined 2.8 percentage points from 2007 to 2010, to 15.1 percent, thereby continuing a decrease observed since direct stock ownership peaked in the 2001 SCF at 21.3 percent (data not shown in the tables). Across demographic groups, declines in ownership were more common than increases, with the noticeable exception of families in the top decile of net worth, for whom ownership rose 2.5 percentage points. Ownership also rose slightly for families in the top decile of income (by 0.3 percentage point) and for families headed by a person who was self-employed (by 0.2 percentage point).

Although the major stock price indexes decreased about 25 percent over the 2007-10 period, the median amount of directly held stock for families with such assets rose 12.4 percent, and the mean fell only 9.5 percent. The seeming contradiction between the movement in the indexes and the movement in the median and mean may be explained, in part, by the exit of holders of smaller amounts of stocks.

The wide variation in changes observed across demographic groups reflects changes in ownership rates as well as changes in the composition of some of the demographic groups noted earlier. One noticeable such instance is the group of families included in the lowest 20 percent of the income distribution in each year. The direct stock ownership rate for this group fell from 5.5 percent in 2007 to 3.8 percent in 2010, while median holdings for direct stock owners within the group rose from $4,000 in 2007 to $20,000 in 2010, a level that exceeded that for all but the highest income quintile group. An important part of the change in the median for the lowest income group may be explained by a change in the composition of the group to include a larger-than-usual fraction of families with relatively high net worth.

The great majority of families with directly held stock owned stock in only a small number of companies. As shown in the following table, over the three-year period, there were signs of increased diversification as the share of families owning stock in only one company decreased:

For 35.5 percent of stockowners in 2010, at least one of the companies in which they owned stock was one that employed, or had employed, the family head or that person's spouse or partner (data not shown in the tables). Direct ownership of stock in a foreign company was less common; only 15.3 percent of stockholders had this type of stock.

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Pooled Investment Funds

Directly held pooled investment funds are among the least commonly held of the types of financial assets shown in table 6.²³ As was the case for directly held stocks, from 2007 to 2010, direct ownership of pooled investment funds fell--a decline of 2.7 percentage points, to 8.7 percent of families in 2010. Ownership of pooled investment funds dropped for almost every demographic group over the three-year period, though the decrease was very slight for the top decile of the net worth distribution. The ownership declines at both the overall level and the level of the demographic groups continue a pattern observed since 2001, when overall ownership of pooled investment funds was at 17.7 percent (data not shown in the tables).

The survey also collects information on the different types of pooled investment funds owned by families. Ownership shifted over the recent period away from stock funds and toward "other bond" funds (largely corporate bonds); the residual "other" category, which consists almost entirely of hedge funds and exchange-traded funds, also increased, as shown in the following table:

Among families owning pooled investment funds, the value of holdings has continued an increase seen over the preceding decade; in the recent three-year period, the median holding rose 36.3 percent, and the mean rose 19.8 percent. Median and mean values increased across almost every demographic group, evidence that the decrease in ownership may have been concentrated among families with relatively small account balances (data not shown in the tables).

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Retirement Accounts

Ownership of tax-deferred retirement assets such as personally established individual retirement accounts (IRAs) or job-based 401(k) accounts tends to increase with families' income and net worth.²⁴ For several reasons, ownership is also more likely among families headed by a person less than 65 years of age than among the older groups. First, even though retirement accounts have been increasingly prevalent in the past 30 years, they may not have become available until relatively late in the careers of many persons in the older groups. Second, beginning in the year that a person reaches age 59-1/2, funds held by that person in retirement accounts may be withdrawn without penalty, and some in the two oldest age groups may have already done so. Third, families may have used funds from retirement accounts accumulated from previous employment to purchase an annuity at retirement; annuities are treated in the SCF as a separate type of managed asset.

From 2007 to 2010, the fraction of families with retirement accounts fell 2.6 percentage points to 50.4 percent; the decrease offset most of the 3.1 percentage point increase over the preceding three years. The overall rate of retirement account ownership has varied around 50 percent for about the past decade. In the recent three-year period, the fraction of families that had some type of account plan associated with a current or past job or that held an IRA or Keogh account decreased, and the fraction that had at least one account of each type declined as well, as shown in the following table:

Over the 2007-10 period, ownership of retirement accounts decreased for nearly all of the groups considered here. The most noticeable declines in ownership were among families in the middle-income, middle-wealth, and middle-age groups; for those groups, retirement accounts had been growing in importance as a supplement to Social Security and other types of retirement income, and the decrease in ownership in the past three years may represent a setback in retirement preparedness. Across employment and occupation categories, the largest changes were the 3.1 percentage point drop in retirement account ownership among families whose head was working for someone else and the 7.2 percentage point drop for the technical, sales, or services occupation group.

In a reversal of a trend over the preceding decade, median holdings in retirement accounts decreased in the 2007-10 period; for families having such accounts, the median fell 6.6 percent. Mean balances continued to grow, however, at a rate of 10.7 percent over the three-year period. The patterns of changes in median account balances across demographic groups were mixed, but as with ownership rates, families in the middle-income, middle-wealth, and middle-age groups saw decreases in median account balances, while retirees and those with higher incomes and higher net worth saw noticeable increases.²⁵

Although tax-deferred retirement assets are clearly an important element in retirement planning, families may hold a variety of other assets that are intended, at least in part, to finance retirement. Such other assets might also be used for contingencies as necessary. Similarly, a need for liquidity might drive a family to liquidate or borrow against a tax-deferred retirement asset, even if it will be assessed a penalty for doing so.

Two common and often particularly important types of retirement plans are not included in the assets described in this section: Social Security (the federally funded Old-Age and Survivors' Insurance program (OASI)) and employer-sponsored defined-benefit plans. OASI is well described elsewhere, and it covers the great majority of the population.²⁶ The retirement income provided by defined-benefit plans is typically based on workers' salaries and years of work with an employer, a group of employers, or a union. Unfortunately, future income streams from OASI and defined-benefit plans cannot be translated directly into a current value because valuation depends critically on assumptions about future events and conditions--work decisions, earnings, inflation rates, discount rates, mortality, and so on--and no widely agreed-upon standards exist for making these assumptions.²⁷

However, the SCF does contain substantial information for family heads and their spouse or partner regarding any defined-benefit plans or other types of plans with some kind of account feature to which they have rights from a current or past job.²⁸ In 2010, 55.1 percent of families had rights to some type of plan other than OASI through the current or past work of either the family head or that person's spouse or partner, below the 57.7 percent level in 2007. For this group of families, the fraction with a standard defined-benefit plan with an annuity payout scheme increased slightly over the recent period, while the fraction with a plan with at least some account feature and the fraction that had both types of plans decreased, as shown in the following table:

In many pension plans with account features, contributions may be made by the employer, the worker, or both. In some cases, these contributions represent a substantial amount of saving, though workers may offset this saving by reducing their saving in other forms. An employer's contributions also represent additional income for the worker. In 2010, 85.4 percent of families with an account plan on a current job of either the family head or that person's spouse or partner had an employer that made contributions to the plan, a decline of 1.8 percentage points from 2007. In 2010, 91.9 percent of families with such plans made contributions themselves, an increase of 0.5 percentage point from 2007. The median annual contribution by employers who contributed to such accounts was $2,300 in 2010, and the median contribution by families who contributed was $3,000; both amounts were little changed from 2007 levels (data not shown in the tables).

The eligibility of working heads of families to participate in any type of job-related pension fell from 55.9 percent in 2007 to 52.9 percent in 2010; it had risen 1.1 percentage points over the preceding three years (data not shown in the tables). Participation by eligible workers is usually voluntary. In 2010, 84.3 percent of family heads who were eligible to participate elected to do so, up slightly from 83.8 percent in 2007.²⁹ The choice to participate appears to be related strongly to income. In 2010, the fraction of eligible family heads declining to participate was progressively lower at higher income levels, and this general pattern was not substantially altered from 2007, as shown by the following table:

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Cash Value Life Insurance

Cash value life insurance combines an investment vehicle with insurance coverage in the form of a death benefit.³⁰ Some cash value life insurance policies offer a high degree of choice in the way the policy payments are invested. Investment returns on such policies are typically shielded from taxation until the money is withdrawn; if the funds remain untapped until the policyholder dies, the beneficiary of the policy may receive, tax-free, the death benefit. In contrast, term insurance, the other popular type of life insurance, offers only a death benefit. One attraction of cash value policies for some people is that they promote regular saving funded through the required policy premium.

Ownership of cash value life insurance is broadly spread across demographic groups, with a tendency toward increasing rates among families with higher levels of income and net worth and those with older family heads. The change in ownership of cash value policies over the 2007-10 period continued a declining trend, decreasing 3.3 percentage points, to 19.7 percent of families in 2010. The decline was shared by virtually all demographic groups; the only group with a noticeable increase in ownership is families headed by someone aged 75 or older. Over the three-year period, ownership of any type of life insurance, cash value or term, also fell--from 64.9 percent in 2007 to 62.6 percent in 2010 (data not shown in the tables). Of those families with some type of life insurance, the proportion with term policies was about unchanged, while the proportion with cash value policies fell; these changes are similar to trends observed in the earlier surveys.

After rising over the previous three-year period, the median value of cash value life insurance for families that had any such insurance fell 13.1 percent between 2007 and 2010, and the mean fell 13.1 percent. The median showed a mix of increases and decreases across demographic groups, although it declined considerably for younger families, single families with children, families headed by a person who was self-employed or working for someone else, and families headed by someone working in a technical, sales, or service occupation.

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Other Managed Assets

Ownership of other managed assets--personal annuities and trusts with an equity interest and managed investment accounts--is concentrated among families with higher levels of income and wealth and among families headed by a person who is aged 55 or older or who is retired.³¹ Ownership of these assets was little changed between 2007 and 2010, following a more substantial decrease over the previous three years. Changes in ownership rates across demographic groups were mixed in the recent three-year period, with the vast majority of 2010 values within 2 percentage points of the corresponding 2007 values. Across all families, the fraction with an annuity was nearly unchanged over the period, and the fraction with a trust or managed investment account edged down, as shown in the following table:

Between 2007 and 2010, the median value of other managed assets for families that had such assets decreased 4.5 percent, offsetting some of the substantial increase in the preceding three-year period. Over the more recent period, the corresponding mean value fell 4.9 percent. Changes in median holdings varied greatly across demographic groups--for example, increasing substantially in the top two income groups, but falling by more than 60 percent in the group of families headed by someone aged 35 to 44. For families with an equity interest in an annuity, the median holding increased 14.5 percent, to $60,000 in 2010; for families with a trust or managed investment account as defined in this article, the median holding fell 13.3 percent, to $109,000 (data not shown in the tables).

As noted in the discussion of retirement accounts, some families use settlements from retirement accounts to purchase an annuity. In 2010, 35.0 percent of families with annuities had done so (data not shown in the tables). Of these families, 73.7 percent had an equity interest in their annuities.

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Other Financial Assets

Ownership of other financial assets--a heterogeneous category including oil and gas leases, futures contracts, royalties, proceeds from lawsuits or estates in settlement, and loans made to others--fell 1.3 percentage points between 2007 and 2010, to 8.0 percent. Ownership of such assets tends to be more common among higher income and wealth groups, younger age groups, and families headed by a person who is self-employed or retired. Ownership across demographic groups generally declined over this period, while the median holding for those who had such assets decreased 20.6 percent, to $5,000.

Holdings may be grouped into four categories: cash, which includes money owed to families by other persons; future proceeds, which include amounts to be received from a lawsuit, estate, or other type of settlement; employment and business-related items, which include deferred compensation, royalties, futures contracts, and derivatives; and other. As shown in the following table, the proportion of families holding various types of other financial assets remained fairly constant over the three-year period, with cash being by far the most frequently held component:

Some publicly traded companies offer stock options to their employees as a form of compensation.³² Although stock options, when executed, may represent an appreciable part of a family's net worth, the survey does not specifically ask for the value of these options.³³ Instead, the survey asks whether the family head or that person's spouse or partner had been given stock options by an employer during the preceding year. In 2010, 6.2 percent of families reported having received stock options, a decline of 2.1 percentage points below the level in 2007; this decrease continues a downward trend since the peak of 11.4 percent recorded in the SCF in 2001 (data not shown in the tables).

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Direct and Indirect Holdings of Publicly Traded Stocks

Families may hold stocks in publicly traded companies directly or indirectly, and information about each of these forms of ownership is collected separately in the SCF. When direct and indirect forms are combined, the 2010 data show a decline in stock ownership to levels not seen in the SCF since the late 1990s (table 7). Between 2007 and 2010, the fraction of families holding any such stock fell 3.3 percentage points to 49.9 percent, a level well below the 2007 peak. Much like ownership of directly held stock, ownership of direct and indirect equity holdings is more common among higher-income groups and among families headed by a person aged 35 to 64. Over the recent three-year period, ownership decreased for all income groups. Across age groups, ownership fell the most--7.5 percentage points--for families headed by persons aged 65 to 74; for other age groups, the declines were much more modest, and for some, ownership rates were basically unchanged or rose slightly.

The overall median value of direct and indirect stock holdings dropped 18.3 percent between 2007 and 2010. Changes in the median value across demographic groups were generally negative, with the exception of the highest income decile and families headed by a person aged less than 35 or by a person aged 65 or older. As a proportion of financial assets, holdings fell from 54.0 percent in 2007 to 47.0 percent in 2010. The lowest income quintile is the only demographic group that saw an increase in the share of financial assets held in stocks, rising from 39.2 percent in 2007 to 40.5 percent in 2010.

Among families that held equity, either directly or indirectly in 2010, ownership through a tax-deferred retirement account was most common, followed by direct holdings of stocks, direct holdings of pooled investment funds, and managed investment accounts or an equity interest in a trust or annuity. Over the 2007-10 period, ownership of equity holdings through tax-deferred accounts rose, while both direct ownership of equity and ownership through pooled investment funds fell. Ownership of equity through a trust or annuity was basically unchanged. The fraction of equity owners with multiple types also declined, as shown in the following table:

The distribution of amounts of holdings over these types of equities shows a different pattern. Of the total amount of equity, 42.3 percent was held in tax-deferred retirement accounts, 30.9 percent as directly held stocks, 20.4 percent as directly held pooled investment funds, and 6.4 percent as other managed assets (data not shown in the tables).

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Nonfinancial Assets

By definition, a decrease in nonfinancial assets as a share of total assets from 2007 to 2010 must exactly offset the 3.9 percentage point rise in the share of financial assets from 2007 to 2010 that was discussed earlier in this article (table 5). In any given survey, the changes in these shares are driven by spending decisions, changes in portfolio choices, portfolio valuation, or all three. Between 2007 and 2010, the largest drivers were declines in house values and business equity.

Over the 2007 to 2010 period, housing as a share of total nonfinancial assets fell 0.6 percentage point, while business equity as a share of total nonfinancial assets fell 1.5 percentage points (table 8). However, housing is a much larger share of total nonfinancial assets than business equity in any given year, so the two asset types account for roughly the same share of the overall decline in the ratio of nonfinancial to total assets. That is, of the 3.9 percentage point decrease in the overall shareof nonfinancial assets, housing and business equity each accounted for approximately 2.2 percentage points. Other residential property contributed slightly to the decline (0.2 percentage point). These drops in asset shares were offset by a 0.8 percentage point increase in the share of vehicles and a 0.9 percentage point increase in the share of nonresidential property.

In 2010, the level of ownership of nonfinancial assets was 91.3 percent of families, 0.7 percentage point lower than in 2007 (first half of tables 9.Aand 9.B, next-to-last column). Across most of the demographic groups shown, the 2010 ownership rate was 80 percent or more; exceptions were the lowest income and wealth groups, families headed by a person who was neither working nor retired, and renters. Over the 2007-10 period, ownership fell most for the less-than-35 age group, childless single families headed by someone younger than age 55, nonwhite or Hispanic families, families living in the South or the West, and families in the lowest quartile of the net worth distribution.

Over the recent period, the median holdings of nonfinancial assets for families having any such assets fell 16.8 percent, and the mean fell 17.6 percent. Across demographic groups, substantial declines in the medians far outnumbered increases. The largest drops in the median value occurred for the lowest quintile of the income distribution; families headed by someone with less than a high school diploma; families headed by someone working in technical, sales, or service occupations; and families in the second quartile of the net worth distribution. Median holdings inched up for a few demographic groups whose total nonfinancial holdings tend to be relatively low and that are generally not dominated by housing or business assets.

Vehicles

Vehicles continue to be the most commonly held nonfinancial asset.³⁴ From 2007 to 2010, the share of families that owned some type of vehicle edged down 0.3 percentage point to 86.7 percent. Trends in ownership rates over the recent three years were mixed across most demographic groups. Across age groups, ownership decreased for the less-than-35 and 55-to-74 age groups while rising for the 75-or-more age category. Vehicle ownership decreased for single families without children headed by someone younger than age 55; families headed by a person with a high school degree, some college, or a college degree; families headed by a person who was working for someone else, self-employed, or included in any occupation group except retired; nonwhite or Hispanic families; families living in the South or the West; and renters.

Given the slowdown in purchases of new cars during the period between 2007 and 2010 noted earlier and the consequent aging of families' holdings of vehicles, it is not surprising that the median market value of vehicles for those who owned at least one vehicle declined 5.6 percent from 2007 to 2010, and the mean declined 4.3 percent.³⁵ Indeed, the median value of vehicle holdings was flat or rising only for higher-income or higher-wealth groups, families headed by someone aged 65 or older, and families in the other-not-working work-status group. The largest declines in the median were observed for the third and fourth quintiles of income, the lowest three quartiles of wealth, and families headed by someone younger than 55 years of age. Continuing a trend, the share of the total value of owned vehicles attributable to sport utility vehicles rose over the recent period from 21.5 percent to 23.8 percent (data not shown in the tables).

Some families have vehicles that they lease or that are provided to them by an employer for personal use. The share of families having a vehicle from any source fell 0.7 percentage point over the recent period, to 88.9 percent (data not shown in the tables). The small difference between this rate and the ownership rate for personally owned vehicles belies a larger change in the rates of holding for leased and employer-provided vehicles. The proportion of families with a leased vehicle fell from 5.2 percent in 2007 to 3.0 percent in 2010, while that of families with an employer-provided vehicle fell less dramatically, from 6.8 percent to 6.4 percent over the recent period.

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In 2010, groups that had an ownership rate less than the overall rate included nonwhite or Hispanic families; families with relatively low income or wealth; families living in the Northeast or the West; single families; and families headed by a person who was working for someone else, who was neither working nor retired, who was aged less than 45, or who had less than a college degree. Over the three-year period, homeownership fell most for the lowest quintile of the income distribution; families in the second quartile of the net worth distribution; families headed by a person who was self-employed or working in a technical, sales, or service job; and families headed by a high school graduate. Across geographic Regions, the decline in ownership was most pronounced in the South and West Regions but also fell in the Northeast; in contrast, the Midwest saw a 2.0 percentage point increase in homeownership.

Housing wealth represents a large component of total family wealth; in 2010, primary residences accounted for 29.5 percent of total family assets. Over the 2007-10 period, this percentage declined 2.2 percentage points overall. The relative importance of housing in the total asset portfolio varies substantially over the income distribution, with housing generally constituting a progressively smaller share of assets with increasing levels of income, as shown in the following table:

The median and mean values of the primary residences of homeowners fell between 2007 and 2010; overall, the median decreased 18.9 percent, and the mean fell 17.6 percent. These percentage losses in the median and mean translated into large dollar losses: $39,500 for the median and $55,700 for the mean. Homeowners in virtually all demographic groups saw losses in the median, and most of those losses were substantial; the one exception was the lowest quartile of the net worth distribution, where homeownership jumped 8.1 percentage points and the median home value increased 31.2 percent, most likely reflecting a compositional shift within that lowest wealth group. Otherwise, substantial decreases in median housing values were widespread.

In 2010, 14.4 percent of families owned some form of residential real estate other than a primary residence (second homes, time-shares, one- to four-family rental properties, and other types of residential properties), a level that is up 0.6 percentage point from the corresponding figure in 2007 and up 1.9 percentage points since 2004 (data not shown in the tables).³⁷ Although the survey does not ask directly about ownership of second homes, such homes should largely be captured as residential properties that are owned 100 percent by the family and for which no rent was collected; in 2010, 5.8 percent of families had at least one such property, down 0.3 percentage point from 2007 but still 1.2 percentage points higher than in 2004.

Ownership of other residential real estate is more common among the highest income and wealth groups; the age groups between 45 and 74; or families headed by a self-employed person, a person working in a management or professional occupation, or a person who was a college graduate. Over the recent three-year period, the median and mean values of other residential real estate decreased roughly in line with the median and mean values of primary residences over the recent period; the median for those having such real estate fell 22.1 percent, and the mean fell 18.0 percent. Most of the demographic groups saw substantial declines in the median; exceptions were generally groups where ownership of other residential real estate is low, including the first and second quintiles of income groups, families headed by someone with less than a high school degree, and families that rented their primary residence.

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Net Equity in Nonresidential Real Estate

The ownership of nonresidential real estate fell slightly, to 7.7 percent of families in 2010.³⁸ Ownership follows approximately the same relative distribution across demographic groups as does the ownership of other residential real estate. Changes in ownership during the recent period were mixed across demographic groups. Ownership fell most for families in the age groups between 35 and 54; couples with children; families headed by someone working in a technical, sales, or service occupation; and families living in the West Region. Overall, the median value of such property for owners fell 17.3 percent, and the mean fell 0.8 percent. Particularly large swings in the median value were seen for groups with below-average ownership rates, suggesting that these changes are likely to be due at least in part to sampling variability.

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Net Equity in Privately Held Businesses

The share of families that owned a privately held business interest edged down 0.3 percentage point during the recent period, to 13.3 percent in 2010.³⁹ The proportion has changed little over the past several surveys. Ownership of this type of asset tends to increase with income, wealth, and education and to be the highest for families headed by a person who is aged 45 to 64, who is married or living with a partner, or who has a college degree. Business ownership is about three times as prevalent among homeowners as renters; it is generally lowest in the Northeast and highest in the West. Over the recent three-year period, changes in ownership varied across demographic groups, with relatively large declines observed for families headed by someone 35 to 44 years of age, higher-income families, and families living in the Midwest Region. Ownership also fell among families headed by a person who was self-employed, from 74.9 percent in 2007 to 71.1 percent in 2010.

As noted earlier, equity in privately held businesses makes up a large portion of families' total nonfinancial assets. Over the recent period, privately held business assets as a share of nonfinancial assets fell 2.1 percentage points. Across income-distribution groups, the share of nonfinancial assets attributable to business equity has a U-shape, with the largest shares at the top and bottom of the income distribution, as shown in the following table:

The median holding of business equity for those having any such equity declined 18.5 percent, while the mean decreased 20.5 percent. The mean value in 2010 is 4.1 percent above its level in 2004, and the median is 8.8 percent lower than it was in 2004 (data not shown in the tables). In general, median business equity increases across income, age, and net worth groups, and the medians for white non-Hispanic families and homeowners are substantially higher than for the complementary groups. Over the recent three-year period, large increases in median net equity in businesses were observed in the second, third, and fifth income quintiles; the bottom wealth quartile; and the South Region. There were large declines in median holdings for families in the lowest income quintile and in the West and Northeast Regions.

The SCF classifies privately owned business interests into those in which the family has an active management role and those in which it does not. Of families having any business interests in 2010, 94.0 percent had an active role, and 10.1 percent had a non-active role; 4.1 percent had interests of both types (data not shown in the tables). In terms of assets, actively managed interests accounted for 87.5 percent of total privately owned business interests. The median number of actively managed businesses was 1. The businesses reported in the survey were a mixture of very small businesses with moderate values and businesses with substantially greater values.

The SCF attempts to collect information about items owned or owed by a family's business interests separately from items owned or owed directly by the family. But, in practice, the balance sheet of a business that is actively managed by a family is not always separate from that of the family itself.⁴⁰ Families often use personal assets as collateral or guarantees for loans for the businesses, or they loan personal funds to their businesses. In 2010, 18.2 percent of families with actively managed businesses reported using personal assets as collateral, which is up slightly from 17.8 percent in 2007; at the same time, 15.2 percent of families reported lending the business money, which is down from 17.5 percent in 2007 (data not shown in the tables).

Families with more than one actively managed business are asked to report which business is most important; that business is designated as the primary one.⁴¹ In 2010, the vast majority of primary businesses operated in an industry other than manufacturing; the most common organizational form of those businesses was sole proprietorship, and the median number of employees was 2. However, primary actively managed businesses with more than two employees accounted for 79.5 percent of the value of all such businesses, and the largest shares of value were attributable to businesses organized as subchapter S corporations or limited liability companies, each of which accounted for approximately 30 percent. These patterns are also typical of those observed in the earlier surveys (data not shown in the tables).

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Other Nonfinancial Assets

In 2010, ownership of the remaining nonfinancial assets (tangible items including substantial holdings of artwork, jewelry, precious metals, antiques, hobby equipment, and collectibles) was not very widespread and decreased marginally compared with the level in the previous survey period, to 7.0 percent. Among other nonfinancial assets, the most commonly held items are antiques and other collectibles, which were reported by only 3.0 percent of families in 2010. The composition of other nonfinancial assets changed little from 2007 to 2010, as shown in the following table:

Groups most likely to hold other nonfinancial assets generally include families in the top two deciles of the income distribution, families headed by a college graduate, homeowners, and families in the top quartile of the net worth distribution. Minor changes in holdings were evident across all of the demographic groups. For families having such assets, the median value rose 2.0 percent over the recent period, and the mean fell 21.4 percent. Across income and wealth categories, median holdings generally fell for families in middle and top groups.

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Unrealized Capital Gains

Changes in the values of assets such as stock, real estate, and businesses that families own are often a key determinant of changes in their net worth. Unrealized gains are net changes in the value of assets that are yet to be sold; such "gains" may be positive or negative. To obtain information on this part of net worth, the survey asks about changes in value from the time of purchase for certain key assets--publicly traded stocks, pooled investment funds, the primary residence, and other real estate. In addition, it asks about the tax cost basis of any business holdings, and this figure, along with the current value, may be used as a credible indicator of unrealized gains.⁴² Among families with any unrealized capital gain, the median value of that gain fell 52.7 percent over the 2007-10 period, and the mean fell 39.1 percent (table 10). These declines pushed unrealized capital gains as a share of total family assets down to 24.5 percent, well below the peak of 36.1 percent observed in 2007. The decrease in median and mean unrealized gains was universal across the types of families and assets considered here. The median of unrealized gains on real estate fell 50.5 percent, the median on business assets declined 23.7 percent, and the median of unrealized gains on the financial assets covered in this measure fell 91.9 percent, to $300 in 2010; the mean of unrealized gains in real estate fell 40.6 percent, the mean on business assets declined 33.2 percent, and the mean of unrealized gains on financial assets fell 52.9 percent.

Some families saw losses on the value of their assets sufficient to eliminate any prior gains. Among all families in 2010, 15.1 percent reported a net loss on their primary residence or other real estate, meaning the value they reported for the property in 2010 was below what they reported having paid for it, regardless of when they made the purchase. That rate is nearly triple the 5.5 percent of families reporting a capital loss on their primary residence in 2007 and more than triple the 4.3 percent of families in 2004 (data not shown in the tables).

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