Recession Takes Its Toll on Household Wealth
The net worth of households in the U.S. fell sharply from 2005 to 2009, declining by 28%. But the drop in household wealth affected minorities disproportionately.
The median wealth, or net worth, of U.S. households fell from $96,894 in 2005 to $70,000 in 2009, a drop of 28% when adjusted for inflation. The precipitous decline in wealth was not evenly distributed across racial and ethnic groups. Minority households—Hispanics, blacks and Asians—experienced far steeper declines than white households. In 2009, the median net worth of white households ($113,149) was the highest of all groups. In sharp contrast, Hispanic and black households had a median net worth of $6,325 and $5,677 respectively. Asian households, with a median net worth of $78,066, had much more wealth in 2009 than Hispanics and blacks but much less than whites.
All groups experienced drops in wealth from 2005 to 2009 but there were sharp differences among them. Hispanics’ median net worth fell 66%, from $18,359 in 2005 to $6,325 in 2009. Black households experienced a loss of 53%, from $12,124 in 2005 to $5,677 in 2009. The drop in the wealth of white households was modest in comparison, falling 16% from $134,992 in 2005 to $113,149 in 2009. As a result, the median wealth of white households is now 20 times as high as the wealth of black households and 18 times as much as the wealth of Hispanic households. These ratios are about twice as high as the ratios that existed before the onset of the housing crisis, the stock market crash and the Great Recession (which began in late 2007 and ended in 2009)
Minority households experienced greater losses than whites because they are more dependent on home equity as a source of wealth. As noted above, housing values started to fall sooner than stock prices and, unlike the stock market, the housing market has not yet begun to recover. Hispanics and Asians were further affected because they are disproportionately likely to reside in states that have been among the hardest hit by the housing crisis: California, Florida, Nevada and Arizona. Hispanics and blacks have also been more susceptible to home foreclosures, and their homeownership rates have dropped more than any other group. Read More