Tuesday, August 02, 2011

Minorities in Worse Financial Shape Now than in Last Quarter Century

From the Pew Research Center:
"The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009.

"These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009."
[emphasis added]
In 2009 dollars, black household income dropped more than 1/4th from $6,679 in 1984 to $4,900 in 2009. Hispanic household income dropped more than 1/3rd from $9,660 in 1984 to $6,325 in 2009.

Here's Pew's summary of how bad the loss since 2005 has been:
"The Pew Research Center analysis finds that, in percentage terms, the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009 took a far greater toll on the wealth of minorities than whites. From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households.

"As a result of these declines, the typical black household had just $5,677 in wealth (assets minus debts) in 2009, the typical Hispanic household had $6,325 in wealth and the typical white household had $113,149.

"Moreover, about a third of black (35%) and Hispanic (31%) households had zero or negative net worth in 2009, compared with 15% of white households. In 2005, the comparable shares had been 29% for blacks, 23% for Hispanics and 11% for whites."
[emphasis added]
Most of this income loss was due to the housing market bust.* However, minority business owners took a huge hit.
"In light of the economic downturn, it is notable that business owners, regardless of race and ethnicity, reported large losses in the equity they hold in their businesses. The loss in business equity was highest among minority households, all losing about half the value they started with in 2005."
[emphasis added]
As Thomas Sowell points out, the idea of forcing lenders to give housing loans to families who couldn't afford them ended up devastating poor families.
*Though housing prices actually rose or remained the same between 2005 and 2009 in 42% (21) of the states. Worst states to live in: Nevada (by far the worst at a 49% drop in home prices), Florida Arizona, California, and Michigan (all in the 34-38% drop range).

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