40% loss in net worth in last 3 years

[Rich Weese]

I'm sure many have heard the numbers recently that the median net worth of individuals in the United States has dropped 39% in the last three years. I'm just curious how BP members have fared during the same three-year period.

Most of the loss in net worth was caused due to the devaluation of real estate and the lost equity in people's personal residences. There are many on BP, including myself that have benefited from the lost equity in other people's homes. I'm sure there are members on BP that were at the other end of the spectrum where their net worth decreased because of lost value in a home or actual loss of a home completely.

This represents a tremendous amount of buying power loss of the individual. I would like to think that BP members, with the knowledge we have have not been have Ridge and don't fall into this same median loss of the country on the whole.

There might even be some members here on BP that were involved in both ends of the spectrum, having lost their home or value in their home but gone into the business of purchasing short sales or REO's.

I would be one that has been involved on both ends having seen values of existing properties decrease, but also taking advantage of buying undervalued properties. Just curious into other stories and situations of how we at BP compare with the rest of the country. Rich

[J Scott]

This reply isn't meant AT ALL to be political (I'm a big fan of capitalism, probably fall closer to the "rich" side than the "poor" side and don't begrudge anyone earning and keeping anything), so don't take it that way and let's try not to slip down a political rathole...

With that said, I think the statistic presented is completely meaningless...

This is one of those situations where talking about "averages" is very misleading. While the average median networth may have dropped considerably over the past few years, I'd be willing to bet that the average networth has not.

If you're rich, you probably lost a considerable amount of networth back in 2007-2008. That's because you likely owned a disproportionate amount of capital assets that devalued quickly and steeply doing that period. Certainly, most people in this country lost a lot during that time, but among the "average Joe," there were fewer capital assets owned and therefore less of a proportionate drop (though if your sole asset was your primary residence, you probably lost a lot as well).

Then, during the period from 2009-2012, if you were rich, you likely had some opportunities that were pretty unique in an historical sense -- real estate was as discounted as its ever been, taxes were low, fear was rampant, government policy favored them, etc. Certainly, business owners were being hit hard, but if they had cash reserves, they had an opportunity to build networth through acquisition of capital assets outside their business. Of course, if you're rich, you're more likely to be intelligent about how to acquire wealth/cash, so there's that advantage again (and again, that's what capitalism is all about, those that have the resources and know-how and work ethic will get ahead -- not a bad thing).

Unfortunately, during this same period, those with little cash reserves and no entrepreneurial spirit had essentially no opportunity to get ahead and the world around them in economic turmoil. Employment was down, real estate (for many, the only source of capital assets) was getting crushed, and credit was tight. If you were poor or middle class from 2009-2012, you probably lost a lot more than 40% of your networth.

So, here we are now. The rich have for-the-most-part recovered or positioned themselves to recover from their losses from 2007-2008 (if they were smart), the ultra-rich have gotten ultra-richer or positioned themselves to get ultra-richer (again, if they were smart), and the poor (and even many middle-class) are now in a holding pattern waiting to see what happens around them.

The 40% drop in median networth may be a correct figure, but it's certainly not representative of what happened on the ends of the spectrum -- many lost everything and many increased their wealth considerably (or have positioned themselves to do so).

Btw, I'm guessing that many here on BP were smart enough to at least tread water for the past few years, or if they did lose a fair amount, they were smart enough to figure out how to recover or position themselves to recover.

Now feel free to proceed to beat me up... :)