- Category: News
28 Jul 2011
- Written by Tri-State Defender Newsroom
The Pew Research Center’s latest survey found the financial median wealth of white households now is 20 times that of African-American households and 18 times that of Hispanic households. The “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 the three groups for the two decades prior to the Great Recession that ended in 2009.
The Pew Research Center analysis attributed the lost gains to “the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009.” The recession brought job loss and higher unemployment rates. Nationwide, the African-American unemployment rate is 16.2 percent while the rate for whites is 8.7 percent.
All of this contributes to a loss of household wealth. From 2005 to 2009, inflation-adjusted median wealth fell by 66 percent among Hispanic households and 53 percent among African-American households, compared with just 16 percent among white households. The typical African-American household had $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. Approximately one-third of African American (35 percent) and Hispanic (31 percent) households had zero or negative net worth in 2009, compared with 15 percent of white households. In 2005, the figures had been 29 percent for African Americans, 23 percent for Hispanics and 11 percent for whites.
There goes the neighborhood
Pew’s findings were not surprising to many African Americans, whose neighborhoods have been drained of wealth by a triple economic punch: predatory lending practices, disproportionately high unemployment rates and foreclosures. The financial losses extended far beyond walls of financially struggling homeowners, according to Dan Immergluck, a professor of city and regional planning at Georgia Institute of Technology.
Immergluck’s 2005 report on Chicago called, “There Goes the Neighborhood,” found even then that foreclosures were dramatically sapping home values in many minority neighborhoods. Cook County now is home to 1.28 million African Americans.
“Less conservative estimates suggest that each conventional foreclosure within an eighth of a mile of a property results in a 1.136 percent decline in that property’s value and that each foreclosure from one-eighth to one-quarter mile away results in a 0.325 percent decline in value,” Immergluck wrote.
“This less conservative finding corresponds to a city-wide loss in single-family property values of just over $1.39 billion. This corresponds to an average cumulative property value effect of more than$371,000 per foreclosure,” he concluded.
According to Pew, while home equity declined for white homeowners, the declines were steeper in African-American and Hispanic neighborhoods. White homeowners saw home equity decline from $115,364 in 2005 to $95,000 in 2009, while home equity for African Americans dropped from $76,910 in 2005 to $59,000 in 2009. There was little or no change during this period in the homeownership rate for whites and African Americans; it fell from 47 percent to 46 percent among African Americans and was unchanged at 74 percent among whites, Pew reported.
As the wealth gap widens, what happens to the South?
Metropolitan areas with high percentages of African Americans stand to lose the most from the growing wealth gap. In a 2002 report, Scott Dolan, who has been a tireless advocate for growth in the South, said the gap between black and white wealth has a greater impact in the South.
Dolan’s report, titled “Black Wealth/White Wealth: An Issue for the South,” sounded the alarm that wealth disparity could hurt the region’s ability to produce home-grown entrepreneurs and job creators.
“Anything that negatively impacts the financial well-being of blacks has a much more dramatic impact on the South’s economy than on the rest of the nation,” Dolan wrote. ”The lack of financial assets owned by blacks means that the South loses billions of potential dollars in savings that could be invested in Southern businesses and communities.”
Since then, many African Americans in northern cities – some of them displaced by foreclosures – have returned to their extended family down South. In 2010, the Census found that the South is now home to 57 percent of the nation’s African Americans, which is four percentage points higher than it was in the 1970s.
A local perspective: Optimism? No. Hope? Yes
Roby S. Williams is President Black Business Association. The Tri-State Defender asked him to view the Memphis area in the context of The Pew Research Center’s latest survey.
Tri-State Defender: Does the Pew research analysis of the wealth gap hold true in Memphis?
Roby S. Williams
Therefore when the housing market downturned, African Americans lost a great deal of their accumulated wealth. There are far more complex reasons for the widening of the wealth gap, but the decline in Real Estate values disproportionately affected African Americans.
TSD: Any reason to be optimistic?
R.S. Williams: Optimism is a bit too thin. I know of no reason for optimism. But, and I hastily add, there is some reason for hope. Hope must have a foundation. And, the foundation for our hope must be our persistent pursuit of excellence in all things, beginning with education.
Also, we must weather the housing market crisis and not sell our primary assets at a loss. It may take some time for the market to rebound. But, it would be unwise to sell your home at a loss. This is particularly true for persons in stable neighborhoods.
Further, we would be wise to engage professional financial planners to diversify our portfolios, such that when one sector of the economy experiences a headwind/crisis, all our eggs are not in that particular basket.
(Roby S. Williams, President Black Business Association of Memphis 555 Beale Street Memphis, TN 38103 (901) 526-9300 fax (901) 525-2357)