Unclassified COM/STD/DAF(2012)5/ADD1 COM/STD/DAF(2012)5/ADD1 Unclassified Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 01-Oct-2012 English - Or. English Directorate for Financial and Enterprise Affairs Statistics Directorate Working Party on Financial Statistics Cancels & replaces the same document of 21 September 2012 A Comparison of Household Wealth using the Financial Accounts and the Survey of Consumer Finances To be held on 1-2 October 2012 OECD Conference Centre Beginning at 2:00 p.m. on the first day This document has been prepared by Susan Hume McIntosh (Board of Governors of the Federal Reserve System, Washington, US) The views expressed in this presentation are those of the authors and do not indicate concurrence by other members of the research staff at the Federal Reserve or of the Board of Governors The complete document is only available in PDF format English - Or. English JT03327269 Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
COM/STD/DAF(2012)5/ADD1 2
A Comparison of Household Wealth using the Financial Accounts and the Survey of Consumer Finances S U S A N H U M E M C I N T O S H A N D J A M E S K E N N E D Y F L O W O F F U N D S S E C T I O N B O A R D O F G O V E R N O R S O F T H E F E D E R A L R E S E R V E S Y S T E M O E C D W O R K I N G P A R T Y O N F I N A N C I A L S T A T I S T I C S P A R I S, F R A N C E O C T O B E R 1, 2 0 1 2 * T H E V I E W S E X P R E S S E D I N T H I S P R E S E N T A T I O N A R E T H O S E O F T H E A U T H O R S A N D D O N O T I N D I C A T E C O N C U R R E N C E B Y O T H E R M E M B E R S O F T H E R E S E A R C H S T A F F A T T H E F E D E R A L R E S E R V E O R O F T H E B O A R D O F G O V E R N O R S.
Presentation Outline Calculation of household net worth in the U.S. Flow of Funds Accounts (FFA) Calculation of household net worth in the Survey of Consumer (SCF) Comparison of aggregate trend in household net worth using these two data sets Detail on subcomponents of net worth Tangible assets consumer durables, owner-occupied housing, equity in noncorporate business Financial assets safe, risky, 401k Liabilities mortgages, consumer credit
FFA: Macro Approach Net worth is shown on the household balance sheet table (table B.100) in the quarterly Z.1 release. FFA online Guide will show you the complexity of the calculations. Variety of data sources: govt. agencies, trade associations, private data collections firms Sector includes nonprofits, domestic hedge funds, private equity firms. Investment in tangible assets mainly from BEA. Prices indexes used to calculate level of real estate since 2005. Many household financial assets estimated as residuals Liabilities estimated from source data for lenders.
SCF: Micro Approach Voluntary triennial cross-sectional survey of U.S. families sponsored by the Federal Reserve; most recent survey 2010 Interviewed over 6,500 randomly selected households in 2010; average length 90 minutes Panel element over two periods: 1983 re-interviewed in 1986 and 1989, 2007 re-interviewed in 2009 Uses an area probability sample (geographically based random sample) Oversamples high income households based on tax data Statistical sampling framework and resulting weights allow the estimation of population aggregate.
Net Worth (Trillions of Dollars) Net worth over time $70 $60 Fully Adjusted FFA Survey of Consumer Finances $50 $40 $30 $20 $10 $0 1989 1992 1995 1998 2001 2004 2007 2010 Year
Aggregate household wealth, 2010 Trillions of Dollars SCF FFA Ratio NET WORTH 54.5 44.9 1.21 Assets 65.9 57.4 1.15 Tangible assets 36.4 28.2 1.29 Financial 29.2 assets 29.5 1.01 Liabilities 11.4 12.5 0.91
Ratio Broad Categories of Net Worth SCF-FFA ratios, 1989-2010 1.40 1.20 1.00 Net Worth Tangible Assets Financial Assets Liabilities 0.80 0.60 0.40 0.20-1989 1992 1995 1998 2001 2004 2007 2010 Year
Tangible Assets SCF-FFA ratios, 1989-2010 1.60 1.40 Real Estate Consumer Durables Noncorporate Business 1.20 1.00 0.80 0.60 0.40 0.20-1989 1992 1995 1998 2001 2004 2007 2010 Year
Owner-Occupied Real Estate SCF asks survey respondents to value their houses. Through 2005, FFA benchmarked to the American Housing Survey (AHS). SCF closely aligns with AHS since both have ownerreported value for housing. Since 2005, the FFA moves the 2005 benchmark by BEA net investment and the CoreLogic House Price Index. FFA deviates from SCF and AHS beginning around 2005, rising to a ratio of 1.4 by 2010.
Equity in Noncorporate Business A more volatile measure due to different valuation methods No aggregate benchmark like residential housing SCF asks business owners what their business would sell for today. FFA uses tax data for financial assets and BEA net investment and price indexes to value real estate. In general, SCF values are greater than FFA.
Financial Assets SCF-FFA ratios, 1989-2010 2.00 1.80 1.60 1.40 1.20 Safe Risky 401(k) 1.00 0.80 0.60 0.40 0.20 0.00 1989 1992 1995 1998 2001 2004 2007 2010 Year
Liabilities SCF-FFA ratios, 1989-2010
Percentage of Households Distribution of credit card balances Distribution of Credit Card Balances in SCF and CCP, 2010 14% 12% 10% 8% 6% 4% 2% 0% SCF 2010 CCP 2010 Credit Card Balances (Dollars)
Conclusions FFA and SCF are two datasets with very different goals and methodology. Patterns of aggregate HH net worth over past 25 years are quite similar for both datasets. Some subcomponents of net worth track better than others. Once methodological and other differences are considered, it is easier to understand gaps between SCF and FFA.