The average U.S. household net worth has surpassed a million dollars, according to the Fed's latest Survey of Consumer Finances. But there's a catch.

That's the statistical average. It doesn’t mean that typical, middle-class American families hold a million dollars in cash and assets. The figure is largely skewed by the ever-growing number of billionaires and "one percenters."

In fact, while the mean “net worth by all families” is $1,059,470, the median figure comes to a more understandable $192,700.

According to a 2019 study by Fidelity Investments, two-thirds of American millionaires are self-made. Another study by financial expert Dave Ramsey found that 79% of millionaires did not receive an inheritance from their parents.

But as it turns out, it’s not just hard work and dedication that’s making American households wealthy. The value of their homes plays a huge role, too.

Putting the “house” in household wealth

It’s no surprise that the average net worth of U.S. households grew at the fastest pace in more than three decades at the same time that home values soared to record highs.

According to the St. Louis Fed, real estate was a strong driver of gains in household net worth from the start of the pandemic through the end of 2022.

The value of real estate held by households and nonprofits grew by $2.5 trillion in the second quarter of 2023.

“Americans got a lot wealthier during the pandemic,” Mark Zandi, chief economist of Moody’s Analytics, told CNBC. Zandi said asset prices like homes and stocks “took off” during the pandemic thanks to record stimulus support from the Fed.

While many Americans got wealthier during the pandemic, not everyone benefited equally.

Uneven growth

The bottom 25% of income earners didn’t enjoy anywhere near the same level of growth as the rest of America, according to the Fed’s data.

That’s because poorer households are less likely to own assets that benefit from inflation.

“Those that have big a net worth in America keep getting bigger and those have no net worth are not making much progress,” said Ted Jenkin, CEO and founder of oXYGen Financial.

Americans who don’t have massive home equity to tap into are now struggling with record housing costs. As of September 2023, homebuyers need to earn nearly $115,000 annually just to afford the average home.

The resumption of student loan payments in October is also expected to hit lower-income households and widen the wealth gap even further.

According to a Morgan Stanley survey, roughly one-half of households earning $50,000 or less believe they won’t be able to afford their loan payments.