Jul 272011

According to an analysis performed by the PEW Research Center, the wealth gap between whites and minorities has widened.  REALLY widened.  Not that it was all that great before – during the late 80’s and early 90’s, the ratios of median net worth for white households versus minority households ranged from about 7:1 to 10:1.  Between 2005 and 2009, however, that ration jumped to 15:1 for Hispanics, and almost 20:1 for blacks.  This disparity is the largest since the federal government started tracking this data 25 years ago. 

So, what caused this increased disparity?  Why didn’t the economic meltdown and later “recovery” affect every group equally (or at least more equally)?  A rising tide raises all boats, right?  Well, not if they are in different oceans – or, in this case, invested in different asset classes.  For all groups, home ownership is the biggest contributor to net worth.  However, for minorities, especially younger Hispanics and African-Americans, their home counts for more than half of their net worth.  For whites, that percentage is 44%.  The other major contributor to net worth (particularly older whites) is investment accounts – 401(k)’s, stock accounts, etc.

But why does this matter?  After the crash in 2008, the stock market rebounded, and now is doing better than ever.  The housing market didn’t, and will remain in turmoil for many more years.  Plus, many people in financial trouble deplete their retirement accounts to pay their mortgages, literally mortgaging their futures. 

Obviously, there’s much more to this disparity than just house v. stocks.  But this is something that can be helped, if the federal government and their lender cronies decided to view homeowners with a little less distain.

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