American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
March 2006

Gold Found in Wealth Survey

1. Hot Trends: GOLD FOUND IN WEALTH SURVEY
2. Q & A: WHAT’S UP WITH HOMEOWNERSHIP?
3. Cool Research Links: SURVEY OF CONSUMER FINANCES, 2005 HOMEOWNERSHIP RATES
4. New Titles Available from New Strategist: HOUSEHOLD SPENDING, RACIAL AND ETHNIC DIVERSITY, AMERICAN MEN, and AMERICAN WOMEN
5. Who’s Buying Reports: GET THE SCOOP ON HOUSEHOLD SPENDING

 

BET YOU DIDN’T KNOW

Households with incomes of $100,000 or more control 45 percent of spending on wine consumed at home, but only 17 percent of spending on beer consumed at home.

1. HOT TRENDS

Gold Found in Wealth Survey

It’s here. The Federal Reserve board has released the long-awaited 2004 Survey of Consumer Finances (see link in Cool Research Links below), and number crunchers are drooling over the tables. The Survey of Consumer Finances, taken every three years, provides the only comprehensive look at household assets, debt, and net worth. Here are some results:

NET WORTH INCHES UP: Household net worth (assets minus debts) barely increased between 2001 and 2004, rising from $91,700 to $93,100–a small 1.5 percent increase after adjusting for inflation. This compares with gains of 10 and 17 percent in the previous three-year periods. Even worse, the net worth of householders aged 35 to 44 plunged by 16 percent between 2001 and 2004 (falling from $82,600 to $69,400. Why? Their financial assets lost value, they took on more debt, and the small increase in the value of their nonfinancial assets (read: homes) did not make up the difference.

FINANCIAL ASSETS PLUMMET: The median value of the financial assets owned by the average household fell 23 percent between 2001 and 2004, after adjusting for inflation–from a median of $29,800 to $23,000. A smaller 48.6 percent of households owned stock in 2004, down from 51.9 percent in 2001. Financial assets as a share of total assets fell from 42 to 36 percent.

NONFINANCIAL ASSETS GROW: The homeownership rate increased between 2001 and 2004, as did the value of nonfinancial assets (a category that includes homes). The median value of the average household’s nonfinancial assets rose 22 percent–from $120,900 to $147,800 after adjusting for inflation. The median value of the average household’s primary residence climbed from $131,000 to $160,000.

DEBT IS RISING: Not surprisingly, Americans are deeper in debt. The median amount of debt for households with debt (76 percent of households) rose 34 percent between 2001 and 2004, from $41,300 to $55,300 after adjusting for inflation. Most debt is for buying a home. Credit card debt remains modest. Forty-six percent of households carried a balance on their credit card, owing a median of just $2,200 in 2004.

FEWER ARE SAVING: The proportion of households that saved money during the past year fell from 59.2 percent in 2001 to 56.1 percent in 2004. The survey asked respondents whether their household spent more than their income, the same as their income, or less than their income in the past twelve months. Those who spent less than their income were classified as savers. Even more ominous given the aging of the population, the percentage of households with retirement accounts fell from 52.2 to 49.7 percent between 2001 and 2004.

The Survey of Consumer Finance results are only the latest evidence of the American struggle to save. Other research has shown participation in retirement savings plans to be woefully inadequate. An analysis by the Employee Benefit Research Institute (http://www.ebri.org) reveals that a 40 percent minority of workers participates in a 401(k)-type plan or owns an IRA. Another EBRI study finds a miniscule 4.5 percent of workers made a tax-deductible contribution to an IRA in 2002, down from 6.5 percent in 1992.

It is no wonder that only 25 percent of workers are “very” confident in having enough money to afford a comfortable retirement, according to EBRI’s 2005 Retirement Confidence Survey. The 52 percent majority has saved less than $25,000. Even among workers aged 45 or older, most have saved less than $50,000.

Why can’t Americans save more? Many factors play a role, such as:

  • The steep rise in the cost of necessities such as health insurance. Who can afford to save?
  • Economic insecurity. When jobs are tenuous, saving seems like an unaffordable luxury.
  • Stock market volatility. Why invest when it might vanish tomorrow?
  • Low interest rates. Might as well put your money under the mattress.
  • The voluntary nature of retirement savings. Why not wing it and hope for the best?

For too many Americans, their retirement savings plan appears to be a lottery ticket.

By Cheryl Russell, editorial director, New Strategist Publications

If you have any questions or comments about the above editorial, e-mail New Strategist at demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Twenty-two percent of married women under age 30 are Hispanic.

2. Q & A

What’s Up with Homeownership?

Or maybe the question should be, “What’s down with homeownership?” Despite the hot housing market and the aging of the population, the homeownership rate fell slightly between 2004 and 2005, from 69.0 to 68.9 percent of households. These figures come from the Census Bureau, which issues average annual estimates of homeownership every year about this time. The bureau released its 2005 estimates last week (see link in Cool Research Links below). Not only did the nation’s overall homeownership rate fall between 2004 and 2005, but the rate declined slightly in almost every age group. The biggest loss came among householder aged 45 to 49, as their homeownership rate declined from 76.3 to 75.0 percent between 2004 and 2005. Although the homeownership rate of married couples climbed slightly, from 84.0 to 84.2 percent, the rate fell among couples aged 55 or older.

What accounts for the decline in homeownership? One possible explanation is the economic malaise of the past few years, with incomes stagnating and poverty increasing. Another explanation could be divorce, with homeowning couples splitting into two households–one owner and one renter. Or perhaps homeowners in some markets are cashing out. A look at the regional statistics suggests economic stagnation is likely the biggest factor behind the decline. The overall homeownership rate rose in the Northeast (from 65.0 to 65.2 percent) and West (from 64.2 to 64.4 percent) between 2004 and 2005, regions where many of the hottest housing markets are located. The rate fell a tiny bit in the South (from 70.9 to 70.8 percent). In the Midwest, however, which has been hard hit by layoffs in the manufacturing sector, the decline in homeownership was relatively steep–falling from 73.8 to 73.1 percent between 2004 and 2005.

Despite the decline in the homeownership rate between 2004 and 2005, the rate was 1.5 percentage points higher in 2005 than in 2000, when 67.4 percent of households owned their home. Even the Midwest saw an increase in homeownership between 2000 and 2005. Householders in only two age groups lost ground during those five years. The 50-to-54 age group saw its homeownership rate fall from 78.5 to 78.3 percent, and the homeownership rate of householders aged 65 to 69 fell from 83.0 to 82.8 percent. Householders under age 25 saw their homeownership rate rise the most between 2000 and 2005, from 21.7 to 25.7 percent. In both years, householders aged 65 to 74 had the highest homeownership rate, with 83 percent owning their home.

If you have any questions or comments about the above Q & A, e-mail New Strategist at demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Only 2 percent of the nation’s homeowners live in a gated community.

3. COOL RESEARCH LINKS

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful web sites:

http:// www.federalreserve.gov/pubs/oss/oss2/2004/scf2004home.html
The 2004 Survey of Consumer Finances can be accessed at this site. Here you can download the article, “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances,” published in the February 2006 Federal Reserve Bulletin, which details the survey’s findings. Time series data from the survey are also available at this site.

http:// www.census.gov/hhes/www/housing/hvs/annual05/ann05ind.html
If you want the facts about homeownership, this is place to find them. The Census Bureau’s Housing Vacancy Survey provides quarterly estimates of homeownership, which the bureau compiles into annual averages each year. Here you can get 2005 estimates of homeownership by age of householder, household type, race and Hispanic origin of householder, and region, state, and metropolitan area (75 largest) of residence. Historical data are available for every year as far back as 1982 in some tables.

 

BET YOU DIDN’T KNOW

Married couples without children at home (most of them empty-nesters) spend 62 percent more than the average household on vitamins and control 35 percent of the market.

4. NEW TITLES AVAILABLE FROM NEW STRATEGIST

Books and reports from New Strategist are here to help you with your research on American consumers. Order online at http://www.newstrategist.com, call toll free at 800/848-0842, or fax your order to 607/277-5009. The books and reports can be downloaded or ordered in hardcopy.

The U.S. population is growing more diverse much faster than many had predicted. To help you keep up, the new, fifth edition of Racial and Ethnic Diversity: Asians, Blacks, Hispanics, Native Americans, and Whites includes, in addition to detailed estimates and projections of the U.S. population by race and Hispanic origin, the latest socioeconomic data on blacks and Hispanics and more comprehensive information on Asians and American Indians. (Racial and Ethnic Diversity, 5th ed.; 1-885070-71-3; hardcover; 696 pgs.; $94.95)

Updated editions of American Men: Who They Are and How They Live and American Women: Who They Are and How They Live record the many dimensions of men’s and women’s lives as the twenty-first century unfolds. New in these editions are more details on the characteristics of Asians, the latest labor force projections from the Bureau of Labor Statistics, and up-to-date population projections from the Census Bureau. (American Men, 2nd ed.; 1-885070-72-1; hardcover; 344 pgs.; $89.95; American Women, 3rd ed.; 1-885070-73-X; hardcover; 360 pgs.; $89.95)

Knowing how consumers spend their dollars is the key to understanding where our economy is headed. The tenth edition of Household Spending: Who Spends How Much on What is for those who want to know the who, what, and why of household spending. New to this edition are detailed spending tables for Asian households. Also new are detailed spending tables for households with incomes of $100,000 or more–up to $150,000 or more. (Household Spending, 10th ed.; 1-885070-87-X; hardcover; 656 pgs.; $94.95)
Finally, be sure to check out the popular Who’s Buying series, which has been updated and expanded. New to the series is Who’s Buying by Race and Hispanic Origin, which includes the first available spending data for Asian households. Also new is Who’s Buying: Executive Summary of Household Spending, a good choice for researchers who want to understand the big picture of where the money goes and how demographics affect spending.

Go to http://www.newstrategist.com to see detailed tables of contents, download books, or order hardcopies.

 

BET YOU DIDN’T KNOW

Chief executives are the highest paid men, with median weekly earnings of $1,875. Men working in food preparation earn the least, just $319 per week.

5. GET THE BIG PICTURE ON HOUSEHOLD SPENDING

The Who’s Buying series of reports, which are based on the tenth edition of Household Spending: Who Spends How Much on What, bring you even more detail about how much Americans spend by the demographics that count–age, income, household type, race and Hispanic origin, region of residence, and education. To round out the picture, each report also presents who-are-the-best-customers analyses of the data, showing at a glance the demographics of household spending product by product.

The Who’s Buying series includes:

  • Who’s Buying Alcoholic and Nonalcoholic Beverages, 2nd ed.
  • Who’s Buying Apparel
  • Who’s Buying at Restaurants and Carry-Outs, 3rd ed.
  • Who’s Buying by Race and Hispanic Origin
  • Who’s Buying Entertainment, 2nd ed.
  • Who’s Buying: Executive Summary of Household Spending
  • Who’s Buying for Pets, 2nd ed.
  • Who’s Buying for Travel, 2nd ed.
  • Who’s Buying Groceries, 3rd ed.
  • Who’s Buying Health Care, 2nd ed.
  • Who’s Buying Household Furnishings, Services, and Supplies, 3rd ed.
  • Who’s Buying Information Products and Services, 2nd ed.
  • Who’s Buying Transportation, 2nd ed.

 

If you need the big picture for items ranging from wine to cell phones, from pet food to sofas, go to http://www.newstrategist.com to see detailed tables of contents and to order downloads or hardcopy.

 

BET YOU DIDN’T KNOW

Sixty-seven percent of women use the Internet, and 59 percent were online yesterday.