Black and Hispanic wealth hit hardest by recession

by | Jul 26, 2011 | Business & Tech

WASHINGTON — Blacks and Hispanics in the U.S. were the biggest losers in wealth during the recession, according to a study published Tuesday by the Pew Research Center.

The results based on an analysis of Census data revealed that the wealth gap between whites and the nation’s two largest minority groups have grown to their widest levels since the government began publishing such data a quarter century ago.

“The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households,” the group’s researchers wrote.

Household wealth is the sum of assets (houses, cars, stocks and mutual funds, etc) minus the sum of debt (mortgages, auto loans, etc), the study defines. It is different from household income, which measures the annual inflow of wages, interest, profits and other sources of earnings.

Other Key Findings
Hispanics: The net worth of Hispanic households decreased from $18,359 in 2005 to $6,325 in 2009. The percentage drop—66%—was the largest among all groups.
Blacks: The net worth of black households fell from $12,124 in 2005 to $5,677 in 2009, a decline of 53%. Like Hispanics, black households drew a large share (59%) of their net worth from home equity in 2005.
Whites: The drop in the wealth of white households was modest in comparison, falling 16% from $134,992 in 2005 to $113,149 in 2009.
Asians: In 2005 median Asian household wealth had been greater than the median for white households, but by 2009 Asians lost their place at the top of the wealth hierarchy. Their net worth fell from $168,103 in 2005 to $78,066 in 2009, a drop of 54%. Like Hispanics, they are geographically concentrated in places such as California that were hit hard by the housing market meltdown.

Pew said that the bursting of the housing market bubble in 2006 and the recession that followed took a far greater toll on the wealth of minorities than whites. It estimates that from 2005 to 2009, inflation-adjusted median wealth fell by 66 percent among Hispanic households and 53% among black households, compared with just 16 percent among white households.

As a result, the typical black household had just $5,677 and the typical Hispanic household had $6,325 in wealth, while the typical white household had $113,149.

Plummeting house values were the principal cause of the recent erosion in household wealth among all groups. Among them, Hispanics suffered the most by the meltdown in the housing market since they are “disproportionately” likely to reside in states that have been among the hardest hit by the housing crisis: California, Florida, Nevada and Arizona.

Young Hispanics and blacks bought their homes near the top of the market and were hit hard by the drop in their housing values, said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality.

The study also suggested that white households are more likely to have benefited from the stock market rebound since 2009 than minority households because a “much higher share” of whites own stocks.