Why the average American family's net worth increased 37% during the pandemic

Americans' family finances overall improved in recent years, despite the economic upheaval caused by the pandemic, according to a new survey from the Federal Reserve.

The average family's net worth jumped 37% between 2019 and 2022. That's the largest three-year increase since the Fed began conducting the survey more than three decades ago.

The survey also found the wealth gap between rich and poor narrowed somewhat during that period. Temporary government relief measures tied to the pandemic may have contributed to the widespread gains.

Job losses or COVID bonuses shifted family financial dynamics

Median family income also rose during the survey period, but only by 3%, and much of that increase was concentrated among people on the upper rungs of the income ladder.

Still, it wasn't the same for all. The income portion of the survey focused on 2021, when more than one in four families said their income was significantly higher or lower than usual. Early in the pandemic, many people lost jobs or dropped out of the workforce, while many others who continued working saw increased wages and COVID-related bonuses.

The central bank has conducted the survey of consumer finances every three years since 1989.

Fewer bankruptcies, more homeowners

Debt levels in the 2022 survey showed little change since 2019. But families were in a better position to cover those debts than they had been earlier, and the share of families who'd filed for bankruptcy in the past five years fell to just 1.3% from 2% in 2019 and 3% in 2016.

Nearly two out of three families were homeowners in 2022 — a modest increase from three years earlier. Rising home values contributed to the gain in household wealth during the period. But they also made homes less affordable for those looking to break into the market.

In 2022, the median home cost more than 4 and a half times the median family income. Affordability has gotten worse this year, as home prices have stayed high and mortgage rates have continued to climb.