Editor’s note: The following item is republished with permission of AOL Real Estate. See the original article: Middle Class Didn’t Lose as Much Wealth as Thought, Scott Winship of Brookings Institution Says.


Americans are richer than they might think, though it may not seem like it.

The Census Bureau recently released data that indicated a drop of more than 35 percent in median household wealth between 2005 and 2010, while the Federal Reserve released a survey weeks ago that found that median net worth plummeted by 39 percent from 2007 to 2010.

The reports paint a grim picture of the state of the middle class, but the degree of the wealth decline that they suggest, when taken in context, may not be close to as bad as it seems.

That’s because wealth levels in the early- and mid-2000s were largely "illusory" and based on a false belief, some experts say, that Americans’ homes were actually worth their housing-boom values.

"The bursting of the bubble exposed the wealth gains as having been unreal and produced the sizable declines in net worth revealed in the government data," wrote Scott Winship, a fellow in Economic Studies at the Brookings Institution, in a recent opinion piece titled "Middle Class Wealth: It’s Not as Bad as It Looks."

A cascade of foreclosures and an excessive supply of homes — which are both symptoms of a manic housing market once wedded to the notion that home prices would never fall — have pushed down home values by more than a third. The severe drop in prices, many argue, suggests that homes never should have been considered as valuable as they were.

If you ignore home values, middle-class household wealth has flat-lined since the 1980s, according to data from the Fed and the Census Bureau.

While it’s not music to anyone’s ears that average Americans are perhaps no richer than they were 25 years ago, the fact that we are not much poorer might also seem a wonder to some. After all, the country just weathered the greatest economic calamity since the Great Depression.

The idea that the "golden years" of the 1950s, when the post-World War II economy steamed full speed ahead, were the halcyon days of America’s middle class is a myth.

At least, if prosperity is measured by wealth, median household wealth is 15 percent higher than it was in 1970, according to Winship, and median income has doubled since 1960.

"A lot of people will say the 2000s were a lost decade," Winship told AOL Real Estate. "But it’s still the case that, because of all the growth that preceded it, we’re just much better off than we were during the golden age."

Current estimates also may lowball household wealth because they do not count senior entitlements, including Social Security and Medicare, which have grown more generous over the years. Federal Reserve Board research shows that if they were included, median net worth for adults under age 65 in 2010 would have been at least four times higher than wealth estimates based on the standard definitions of net worth used by the Census Bureau and the Fed, Winship said.

See the story, Middle Class Didn’t Lose as Much Wealth as Thought, Scott Winship of Brookings Institution Says, on AOL Real Estate.

More from AOL Real Estate:

©2012 AOL Inc. All Rights Reserved.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription