Many economic terms are abstract and difficult to understand, but the phrase “household assets” isn’t one of them. The term describes exactly what it sounds like it would: an aggregate amount of assets owned by households -- individuals and families -- as opposed to assets owned by corporations or other organizations. Measuring household assets, and changes in people’s assets, can be used to predict consumption.
For homeowners, housing wealth makes up about half the value of all their household assets, according to Boston College. Housing wealth doesn’t measure the value of a home. It’s a measure of equity, and the amount of wealth a homeowner spent on paying off his home, rather than placing assets in other investments or purchasing goods. Housing wealth also includes the value of property a home is built upon, and, in the case any members of the household operate as landlords, the equity they have in any business properties.
Financial assets can be a large portion of household assets. Financial assets are any investment that is owned primarily for financial purposes, such as stocks, bonds and other financial assets. It can also include completely liquid assets such as savings and checking accounts and cash on hand. Financial assets help measure a household's -- or, when viewed in aggregate, the economy’s -- ability to meet financial stresses by liquidating these assets in an emergency. The amount of financial assets households hold can also be used to measure household savings rates.
While many households spend a large portion of their wealth on consumables, they also purchase tangible property. Tangible property can contribute to a household’s overall worth, with personal property such as cars, collectibles, jewelry, furniture, art and other large-ticket items representing spending power. While the value of tangible personal property can help measure a household’s net worth, it can be difficult to liquidate personal property, and often, because of depreciation or other factors, won’t fetch as much on the secondary market as the original buyer paid for it.
Household Assets as Financial Barometer
The value of household assets, when viewed in aggregate across large segments of the economy, helps economists judge the strength of the economy. Increases and decreases in housing wealth are usually matched by consumption levels, which drives about 66 percent of GDP, according to Boston College. The relationship between household assets and household liabilities -- personal debt -- is often seen as an indicator of savings versus spending, as well as a barometer of household spending, which impacts the GDP.
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