Despite the rising cost of living crisis making financial flexibility seem like a far-fetched dream for many, the Federal Reserve’s recent consumer finance survey brought a startling revelation. The average American household now technically boasts a millionaire status. Specifically, the mean net worth of American households touched the $1.06 million mark in 2022, adjusted for inflation. This figure is a significant leap, about 23%, from the $868,000 reported in 2019.
Interestingly, this financial upswing thrived against economic adversities shaped by the pandemic and the war in Ukraine. These events notwithstanding, 2022 saw American households in a markedly improved fiscal position compared to pre-pandemic times. However, when the lens focuses on the median net worth, a less distorted figure representing the middle point of wealth distribution, the average American household’s net worth is $192,900. Though a more modest number, it still means a 37% increase post-inflation over three years.
There is, however, a disparity between the topmost and lowermost earners. The mean net worth balloons due to the immense wealth of the top 10% of households, averaging net assets of $6.63 million. In stark contrast, the bottom 10% struggle with a mean net worth of $5,300.
The calculations that arrive at these mean figures involve summing up the total net worth of American households and dividing this aggregate by the number of households. A crucial factor buoying these numbers is the housing market’s explosive growth. Statistics underscored the financial boon of homeownership, with about two-thirds of American families owning property in 2022, nudging slightly higher from three years prior.
As property values soared, homeowners saw their financial status inflate, with their average net worth rocketing to $1.53 million, juxtaposed against the $155,000 attributed to non-homeowners. The feverish housing market is not just a US phenomenon. In the UK, escalating house prices resulted in over 41,000 new homeowner millionaires.
However, the ballooning real estate prices present a double-edged sword. Prospective first-time homeowners face daunting financial barriers, with a Federal Reserve survey highlighting an unsettling reality: 65% of renters are sidelined by the sheer unaffordability of down payments on home purchases.
Paradoxically, while household wealth sees general uptrends, individual millionaire statuses are declining. UBS’ annual wealth report noted a substantial contraction in the global millionaire population, shrinking from 62.9 million to 59.4 million between 2021 and 2022. This decrease in millionaires, the most dramatic since the 2008 financial debacle, includes a reduction of 1.8 million in the US alone. This decreases the millionaire count to 22.7 million.
Similar trends echoed in the UK and Japan, which saw significant dips in their millionaire demographics. Additionally, the global population of ultra-high-net-worth individuals, those possessing over $50 million, decreased by 22,500, bringing the total to 243,000.
This financial dichotomy paints a complex picture. On the one hand, average household wealth showcases millionaire status, heavily skewed by the upper echelons of wealth. Conversely, middle-class economic stability teeters on uncertainty, with homeownership, a traditional marker of financial security, becoming an unattainable dream for many. Amid these trends, the question remains: beyond the millionaire milestone, how stable and attainable is financial security for the broader American population?
