There has been a lot of discussion about how the country’s economic recovery has been spread unevenly between high- and low-income households. New research from the Federal Reserve Bank of St. Louis suggests that there’s also a wide disparity among age groups.

The analysis from the bank’s Center for Household Financial Stability found that households headed by people younger than 40 have recovered only about one-third of the wealth lost during the recession. Meanwhile, the balance sheets of middle-aged (40 to 61 years old) and older families (62 and over) have been fully restored. (The values are scaled to equal 100 in 2007 and based on the Fed's Survey of Consumer Finances. )


The culprit, according to economists William R. Emmons and Bryan J. Noeth, is housing.  From 1989 until the recession, changes in the average value of housing affected all age groups in the same ways. In fact, the value of young families’ homes actually fared a little better than older households’ through the early 1990s.

But their fates diverged in 2007, when young families suffered a much sharper decline in home values than other age groups. The rebound has also been much more muted, remaining about 35 percent below the peak.


Part of the problem for young families is that fewer of them actually own homes now. The national homeownership rate is 65.1 percent – the lowest level since 1979. That has been driven by a move toward renting by young families. In 2005, about half of young families owned their homes. Last year, that figure was just 42.2 percent, the largest drop of any age group.

The researchers argue that has translated in a massive loss of wealth for young households. The report estimates that the average real wealth for that age group was $108,000 in 2013, a 30 percent plunge  from 2007. Middle-aged households dipped 1.3 percent $691,000 during the same time period, while older families have increased their average wealth by 3.2 percent to $928,000.

There may be a silver lining, however. Average real net worth for young families has been rising faster than for other age groups since 2010. In other words, they suffered a massive erosion of wealth during the recession, but the recovery has been robust – even though it's far from complete.

In addition, recent research on a similar topic by economists at Ohio State University came to the opposite conclusion about young households’ wealth. An analysis by Lucia Dunn and Randall Olsen using data from the university’s own survey, the Consumer Finance Monthly, found that households headed by those age 35 and younger actually rebuilt their net worth and then some between 2005 and 2012. That report found middle-aged families suffered the worst, which the authors suggest could be related to the difficulty older workers face in finding jobs.

The takeaway? No one is walking away from the recession unscathed.