Thanks to the ownership society, families have never lost more in three months than they did between July and September of this year. And I have no doubt that when the numbers for the fourth quarter are totaled up, 2008 will go down as the worst year for destruction of family wealth in history.

How bad has the third quarter damage been? Household net worth fell $2.81 trillion, the most since records began in 1952, to $56.5 trillion. Real-estate-related assets declined by $646.9 billion, following a $217.1 billion loss. Owners' equity of real-estate holdings dropped to a record-low 44.7% in the third quarter, from 46% in the second quarter. With 1.9 million jobs lost in the last year and unemployment claims at a 26 year high, people are hurting.

You will remember back in 2004 when President George W. Bush boasted about the wonders of the ownership society. In case you forgot, he bragged about his June 2002 America's Homeownership Challenge to the real estate and mortgage finance industries to increase by at least 5.5 million families the number of minority homeowners before 2010. As Bush boasted, "under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2%."

Americans net worth declined by $1.7 trillion in Q1 2008 - - the biggest drop in wealth since 2002 - - as declining home prices and a sluggish stock market took a toll on portfolios and asset holdings, CNNMoney.com reported Friday.

U.S. household net worth fell 3% to $56 trillion at the end of March, according to the U.S. Federal Reserve's flow of funds report, CNNMoney.com reported, with the amount of home equity declining to 46.2% - - the lowest on record.

Economist Peter Dawson told BloggingStocks Friday the net worth and home equity statistics aren't surprising, given the U.S. economy's current fundamentals. Further, he said the economy is now approaching "the danger level" regarding several key economic metrics.

Trends moving in wrong direction

"The two biggest concerns for the economy right now are a lack of job growth across the spectrum and stagnant wages for segments of the American workforce. A lack of job growth and wage increases will put the U.S. economy in a very serious state, and not just with home values, if the current trends do not reverse," Dawson said.
Moreover, Dawson said he's less concerned about home equity and overall home values, because "a home is a derivative asset, really a function of job growth, wage gains, and rising real incomes."

"The key remains job growth, and the ability of all employees to secure the wage gains that are essential to a growing economy. Some have argued that the U.S. economy could compensate for a lack of consumption at home by simply selling more goods to consumers abroad, but this is a deeply flawed model," Dawson said. "Absent consumption at home, the U.S. economy will fall into a prolonged recession, and the key to consumption is job growth and wage increases. Without job growth and wage increases the United States will simply run out of consumers. You'll be a condition where there are plenty of goods in the stores but there will not be nearly enough consumers to buy them. That's a place the nation doesn't want to be in."