Americans saw their wealth increase at the start of this year as the economic recovery boosted stock portfolios.
The Federal Reserve reported Thursday that household net worth rose by 2.1 percent in the first three months of this year to $54.6 trillion. It marked the fourth consecutive quarter that Americans' wealth grew.
Stock portfolios were the biggest force lifting net worth in the first quarter. However, since then, Wall Street has slumped — the Standard & Poor's 500, which measures the 500 biggest stocks, has lost nearly a tenth of its value.
Net worth is the value of assets such as home, checking accounts and investments minus debts like mortgages and credit cards.
Even with the first-quarter gain, Americans' net worth would have to rise an additional 21 percent to get back to its pre-recession peak of $65.9 trillion.
It's likely to be a slow and bumpy ride, analyst say.
Analysts don't think household wealth will return to its pre-recession levels until around 2012.
During the recession, which began in December 2007, household net worth had plunged as low as $48.3 trillion in the first quarter of 2009. Stock holdings and home values tanked. As their net worth evaporated, Americans felt less inclined to spend.
Now that wealth is gradually growing, Americans — especially the affluent — are spending more. But given the fragile economic recovery and recent stock-market volatility, people don't feel comfortable spending lavishly. They usually do during the early phases of recoveries, but not this time. That's one of the main reasons why the country is seeing only modest economic growth.
The value of stocks rose by 4.4 percent to $7.8 trillion in the January-to-March period. That was up from a 2.4 percent gain in the final quarter of last year. But since then stocks fallen sharply.
The stock market as measured by the Dow Jones U.S. Total Stock Market Index lost $1.22 trillion in value between March 31 and the close of trading Wednesday.
The sharp decline in the last month and a half jeopardizes the improvements people have seen in their financial situations and net worth over the past year.
The S&P 500 rose 4.9 percent in the first quarter. By April 23 the index was up 9.2 percent for the year, putting it on a pace to exceed even last year's impressive 23 percent increase.
But the S&P 500 has tumbled 11 percent since the high-water mark, wiping out all of 2010's gains and then some to leave it at minus 3 percent for the year. It is down more than 30 percent from its 2007 peak, leaving many people with tenuous finances and underfunded retirement savings.
Americans' real-estate holding didn't make them more wealthy in the first quarter. The value of real-estate holdings dipped by 0.4 percent, after posting a small rise of 0.2 percent in the final quarter of last year.