dcsimg
   Facebook


rebuild.org finance news:

Back to Latest News Headlines

Wealth gap widens between whites, blacks, Hispanics

[Jul 28, 2011.]

 

White households now have a median net worth that is 20 times that of black households and 18 times that of Hispanic ones, according to a new study from the Pew Research Center. Net worth of minorities has been greatly impacted by the housing crisis and other lingering effects of the recession. The wealth gap is at a record high.


Falling home values


Many minorities who obtained mortgage loans to achieve the dream of home ownership have been greatly affected by plunging home values, as well as high unemployment rates. Median net income in 2009 was $5,677 for blacks, $6,325 for Hispanics and $113,149 for whites. That contrasted with 2005 income figures of $12,124 for blacks, $18,359 for Hispanics and $134,992 for whites. Also, about a third of black and Hispanic households had zero net worth, compared with 15 percent of white households.


The Pew Research Center's analysis blames plunging home values for the wealth disparity. Americans of all races, ages and income groups have been negatively impacted by the housing crisis, but Hispanics have been hit hardest by falling home values. Hispanics saw their median home value tumble 50 percent to $49,195 in 2009 from $99,983 in 2005. The homeownership rate for Hispanics also fell from 51 to 47 percent.


In contrast, white homeowners saw median home value drop to $95,000 in 2009 from $115,364 in 2005. The median home value for blacks fell to $59,000 from $76,910.


Debt from mortgages and other liabilities


Net worth is a household's assets minus liabilities. Assets include homes, bank accounts, investments and cars. Liabilities include credit card debt, auto loans and mortgage loans. As many Americans have experienced job losses and falling home values, they may be more inclined to rely on credit cards to pay for household bills. They are more likely to fall behind on bill payments or even default on financial obligations. They also may find themselves unable to sell a home they can no longer afford and struggle with being underwater on mortgages.


As the housing market continues to struggle, it will become necessary for people to look for ways to build net worth that do not rely so heavily on obtaining a mortgage for home ownership. Investing in a home will still make sense for many people, but other options for growing wealth, such as investment accounts or entrepreneurial pursuits, should be included in an overall wealth-building strategy.


 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

news subscription:

Easily subscribe to the rebuild.org news feed.

Read our news without even visiting our site!

Feedburner
Subscribe to our news

 

news archive:

Rebuild.org monthly news archive