Monday, August 29, 2011
By Lewis Diuguid
McClatchy Newspapers
The Great Recession with soaring unemployment and plunging home and stock values hurt African-Americans and Hispanics far more than whites.
Hispanic household median wealth fell 66 percent and black wealth fell 53 percent from 2005 to 2009.
It may take a generation for minorities to recover from the losses, said the Rev. DeForest “Buster” Soaries Jr., senior pastor of First Baptist Church of Lincoln Gardens in Somerset, N.J. He was among the speakers on a “Building Wealth in Tough Times” panel at this month’s National Association of Black Journalists convention in Philadelphia.
A report from the Pew Research Center — the focus of the panel discussion — said the recession led to the largest wealth disparities in at least 25 years for minorities compared with whites. The median wealth of white households was 18 times greater than the median net worth of Hispanic households and 20 times that of black households.
Assets vs. liabilities
Median wealth is the value of all assets such as home equity, stocks, savings and vehicles minus liabilities such as mortgages, auto loans and credit card debt. The study, based on 2009 census data, found that the typical black household had just less than $6,000 in wealth compared with just over $6,000 for Hispanics and more than $113,000 for whites.
In 2005, black family wealth was twice that amount, Hispanic wealth was three times greater and whites had $20,000 more. Asian families’ household wealth, which was the highest among all of the groups, fell from just over $168,000 in 2005 to about $78,000.
Black, Hispanic and Asian families had most of their wealth in their homes, causing them to experience the worst drop in financial stability. But they also disproportionately got into the housing market when homeownership rates rose from 64 percent in 1994 to 69 percent in 2004.
Minority families were disproportionately hurt when home values crashed. Foreclosures and plunging home equity in Nevada, Arizona, Florida and California hit Hispanic families hardest because of their concentration in those areas. Asian families’ concentration in California caused their home values also to burst with the housing market.
“White households were also affected by the housing crisis,” the Pew report said. “But home equity accounts for relatively less of their total net worth, and that served to lessen the impact of the housing bust.”
Joblessness also was a factor.
“One feature of economic downturns is that minorities tend to experience greater increases in unemployment,” the report said. “The Great Recession is no exception. Job losses were higher for Hispanic and black workers than for whites.”
In Philadelphia, a panel advised that families save enough to carry them for at least 18 months in case of a job loss. That is about how long it takes now for the unemployed to find work.
The panel also advised people to consider self-employment, increase savings and diversify assets. The experts said people of color must abandon a longstanding practice of living in a cash-only, non-bank economy.
The mostly African-American panelists said that spending money has emotional ties for minorities. People spend to feel good or as a show for others. Often individuals don’t know how their money disappeared because they don’t have a budget, Soaries said.
Buy stocks
Use banks and investment firms to grow wealth, the panel advised. They said that now is a good time to buy stocks because of the recent drop in prices.
Budgeting and discerning the difference between need and want will make a difference in whether a family’s wealth grows or erodes. Debt also continues to be a seemingly insurmountable problem.
“The reality of our debt is we have a spending problem,” said Valerie Coleman Morris, a financial literacy expert.
The Pew report said that from 2005 to 2009 the share of households with zero or negative net worth rose from 23 to 31 percent for Hispanics, 29 to 35 percent for blacks, 12 to 19 percent for Asians and 11 to 15 percent for whites.
Some of the best advice from the panel was that minorities must be better stewards of their financial well being. What’s clear is no company or the government will do it.
It’s up to individuals to learn and then teach others.
Lewis W. Diuguid is a member of The Kansas City Star’s Editorial Board. Distributed by McClatchy-Tribune.
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