(Reuters) -U.S. household wealth declined for the first time in two years in the first quarter of 2022 as a drop in the stock market overwhelmed continued gains in home values, a Federal Reserve report on Thursday showed.

Household net worth edged down to $149.3 trillion from a record $149.8 trillion at the end of last year, the Fed’s quarterly snapshot of the national balance sheet showed.

The drop was driven by a $3 trillion fall in the value of corporate equities – a plunge that has worsened in the current quarter – while real estate values climbed another $1.7 trillion.

It was the first decline in household wealth since the first quarter of 2020, when the onset of the coronavirus pandemic shook financial markets and caused a short but deep recession.

Still, the report showed household balance sheets overall remained healthy through the first three months of the year – some $32.5 trillion above pre-pandemic levels – and looked likely to continue to support strength in consumer spending in the face of high inflation.

Of particular note, bank account balances rose, with checkable deposits and currency rising about $210 billion to $4.47 trillion, and time and savings deposits up about $90 billion to $11.28 trillion.

That added cash may help maintain consumer outlays even as the Fed seeks to tamp down demand and slow price rises.

As yet is unclear whether the net effect will be to cushion decelerating growth as the Fed raises interest rates so as to achieve the desired soft-landing, or to dull the impact of higher borrowing costs so much that the central bank ends up needing to push up rates so far and fast that it triggers a recession.

So far, the long-awaited consumer shift from buying goods to buying more services appears to have simply pushed inflation pressures over into services, rather than cooled price pressures overall

Stocks have continued weakening into the second quarter over concern about a surge in inflation to 40-year highs and whether the Fed’s aggressive response to it could stall the economy. The decline suggests Americans’ wealth likely took another hit from the start of April onward.

(Reporting by Lindsay Dunsmuir, Dan Burns and Ann Saphir; Editing by Chizu Nomiyama and Marguerita Choy)