RECESSION HAS HIT HISPANICS THE HARDEST ACCORDING TO STUDY
By: Mariana Cristancho-Ahn
Channel: Economics
The wealth of Hispanics families has had the largest decline of any ethnic group in the U.S., according to a study published on July 26 by the Pew Research Center.
From 2005 to 2009, the inflation-adjusted median wealth of Hispanic households fell 66%. By contrast, it only fell 53% in African American households, and 16% in white households.
The decline has led to the largest wealth disparity in the last quarter of the century, according to Pew Research.
The study defines household wealth as the cumulative sum of assets (houses, cars, savings and checking accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of the debts (mortgages, auto loans, cards credit, etc.). Wealth is different from the household income, which measures the annual flow of wages, interest, profits and other income sources.
From 2005 to 2009 the wealth of Hispanic households fell from $18,359 to $6,325. For African Americans the decline was from $12,124 to $5,677. White households wealth fell from $134,992 to $113,149 during the same period.
The median wealth of white households is 18 times that of Hispanic households and 20 times higher than African American households, according to the study based on figures from 2009.
This is a marked contrast with figures from 2005, when the average wealth of white households was only seven times that of Hispanic households and 11 times higher for African Americans.
Thus, even though Hispanics’ median wealth is higher than African Americans, it had the sharpest decline since 2005.
“These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago,” says the study, which data was obtained by surveys and information provided by the government.
According to Pew Research, the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid 2009 had a much higher cost in the wealth of Hispanics and other minorities. Hispanic households have a greater reliance on home equity for their net worth than whites.
The study points out to the plummeting of house values as “the principal cause of the recent erosion in household wealth among all groups, with Hispanics hit hardest by the meltdown in the housing market.”
In the period between 2005 and 2009, the home ownership rate among Hispanics dropped from 51% to 47% and the median level of home equity fell by almost half of $ 99,983 to $ 49,145. This was due in part to the high concentration of Hispanic population in states like California, Florida, Nevada and Arizona, which experienced the biggest declines in prices of real estate.
The report also says that unemployment is higher for Hispanics and African Americans than for whites.The unemployment rate (non-seasonally adjusted) increased from 5.9% in the fourth quarter of 2007 to 12.6% in the fourth quarter of 2009. The unemployment rate among African Americans increased from 8.6% to 15.6%,and for whites from 3.7% to 8.0% in the same period.
