On March 7, 2025, I highlighted Herb Stein’s article “Balance of Payments,” which appeared in David R. Henderson, ed. The Concise Encyclopedia of Economics. That led to a lively discussion in the Comments section.
Frequent commenter Warren Platts noted that the U.S. Net International Investment as a percentage of GDP has gone downhill since about 2007 and now sits at minus 90%.
That might sound scary and it did make me wonder.
But what matters to most Americans is not how much foreign investment there is but, rather, how much their net worth is and how that has changed.
So I looked at those data and was reassured.
The St. Louis Fed’s FRED site shows U.S. households’ net worth in current dollars from the 4th quarter of 1987 to the 4th quarter of 2024. It rose from $17.426 trillion in 1987 to $160.345 trillion in 2024. $17.426 trillion in 1987 $ is $47.641 trillion in 2024 $. So household net worth over those 37 years increased by 237%.
Of course, the number of households increased too. According to FRED, it rose from 89.479 million in 1987 to 132.216 million in 2024.
That means that average household wealth, in 2024 dollars, rose from $532,426 in 1987 to $1,217,504 in 2024, an increase of 129%.
How about for the shorter period referenced by commenter Platts: 2007 to 2024?
In 2007, household net worth was $65.754 trillion. In 2024 $, that’s $98.702 trillion. So household net worth increased by 62.5%.
The number of households increased from 116.011 million in 2007 to 132.216 million in 2024.
So household net worth per household increased from $850,799 in 2007 to $1,217,504 in 2024, an increase of 43%.
Note that these are averages, not medians. The net worth for a median household at each point in time is below the average.
But what matters here is the average, given that the issue is the situation of the United States as a whole. It says that on average, Americans are getting wealthier despite (maybe partly because of?) increased foreign investment.
READER COMMENTS
Kevin Dick
Mar 31 2025 at 4:49pm
This does not appear to be adjusted for inflation
CPI-U in 2007 = 207
CPI-U in 2024 = 320
320/207 = 1.55
1.43/1.55 = 0.92
Kevin Dick
Mar 31 2025 at 5:07pm
Wait, I see that you corrected for inflation in the middle of the third to last paragraph.
David Youngberg
Apr 1 2025 at 8:44am
It seems to be adjusted for inflation, but FRED for some reason isn’t explicitly stating it is (at least I couldn’t find it).
I say it seems to be adjusted because of the dip in 2022; the only explanation I can think of for that dip is inflation.
Matthias
Mar 31 2025 at 7:21pm
Do you say that as a general point, or have you checked?
For a statistical distribution of a quantity that can’t be negative, your observation tends to be right in practice in general.
But net worth can be negative in practice.
(Though I’d believe that your observation most likely still holds.)
David Henderson
Mar 31 2025 at 7:43pm
I say it as a general point.
I have not checked this time around. But every time I’ve ever checked median household income, and I do so often, it has been positive and less than the average.
steve
Apr 1 2025 at 1:26am
Being numbers nerd I would disagree and say that the median is actually pretty important. The mean is a better picture of how the whole countries performing but the median more accurately reflects what most individuals are experiencing.
Steve
Jon Murphy
Apr 1 2025 at 9:26am
A super quick look at the median numbers reveals the same trend (but at lower absolute figures). I haven’t calculated the percent changes, but we’re still seeing growth.
David Seltzer
Apr 1 2025 at 9:59am
Steve: Being a numbers nerd, you know when the median is below the mean, the distribution is positively skewed. Outliers drag the mean to the right and away from the center of the distribution. The median is less sensitive to skewed data. But…not reasoning from a “price change” what are the outliers that force the mean to the right? DRH suggests increased foreign investment. I suspect increased marginal productivity is also the result of better technology. My bellwether indicators are the Nasdaq and the QQQ tech index. Nasdaq average annual price increase is 12.2% compounded 2007 -2025. QQQ, 14% compounded over the same period.
steve
Apr 1 2025 at 10:40am
Agree with both of you but my point is really trying to point out that the median is more likely to represent what the majority of people experience. While I think people tend to sort of intuitively understand the idea of a bell curve I dont think most really grasp readily onto the difference between mean and median. In a highly skewed distribution many more people will experience the median than the mean. Personally, I prefer that unless it’s easily ascertained it’s not a skewed distribution that we be given both numbers. I am probably being overly pedantic but I think if you tell people that the average person increased their net worth by 129% and no one knows anyone who had that large of an increase it undercuts the message.
Steve
Jon Murphy
Apr 1 2025 at 10:49am
I think this is a fair point and you’re not being pedantic.
A silly and pedantic point: your use of the phrase “average person” is funny. Since both mean and median are averages, “average person” could mean “mean person” (in which case your point would be a contradiction) or “median person” (in which case your point is dead on).
I just chuckled at the intententional sematic ambiguity (although your meaning is perfectly clear).
robc
Apr 1 2025 at 2:13pm
Jon,
It bugged me a bit that Henderson used average instead of mean in the main article.
David Henderson
Apr 1 2025 at 3:54pm
Robc,
Why did it bug you? Mean and average mean the same thing.
robc
Apr 1 2025 at 5:39pm
David,
Because median, mode, geometric mean (and probably many more) are all also averages.
Like Jon said, its a silly and pedantic point. Except I don’t think it is silly. It is one of those things I do too, but am careful in my writing to try not to use “average” but to edit it to “mean”.
Richard W Fulmer
Mar 31 2025 at 8:46pm
This looks interesting:
The Fed – Distribution: Distribution of Household Wealth in the U.S. since 1989
Mark Barbieri
Apr 1 2025 at 11:10am
Very interesting. From the first period on the chart (2009) to the last period, the net worth of the top 0.1% has increased by 260%. The rich are getting richer.
On the other hand, the net worth of the Bottom 50% has increased a whopping 1,115% during that time. The poor and middle class seem to be getting richer even faster.
Alan Goldhammer
Apr 1 2025 at 8:36am
Presumably this large increase is a result of the property/home valuation. Certainly, that was our experience. However, even that is a rough estimate. When we sold our home, we realized a large gross profit. But when one subtracts all the expenses (2 new roofs, 2 AC and furnace replacements, new kitchen, new windows for energy efficiency and a myriad of other costs), the net was actually quite modest.
Looking at the net wealth appreciation of 43% this seems to be quite puny. Almost all conservative stock investments would have outperformed this. In some cases such as an investment in Berkshire-Hathaway, it would wildly outperform.
TMC
Apr 1 2025 at 9:31am
Berkshire-Hathaway wouldn’t have paid your rent every month.
Comments are closed.