There’s a bigger house of cards that hurt minorities’ wealth

July 30, 2011

“Life for me ain’t been no crystal stair.”

That’s the defining line in Langston Hughes’s poem “Mother to Son.”

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.” View Archive

It’s about a mother advising her son to keep climbing, even when the steps have tacks, splinters and broken boards. Hughes’s mother tells her son to not turn back. You may fall, she says, but keep “a-climbin’ on.”

That’s what I want to tell those families, who are disproportionately people of color, who put too much of their faith and money in the American dream of owning a home.

A new report from the Pew Research Center found that the housing bubble that burst and the recession that followed took a far greater toll on the wealth of minorities than whites.

The gap is wide: The median wealth of white households is nearly 20 times that of black households and 18 times that of Hispanic households, according to Pew’s analysis of new U.S. Census Bureau data.

But here’s what’s most concerning about the report: The enormous decline in housing prices had a much greater impact on the net worth of minorities, relative to whites, because housing assumes a larger share of their portfolios.

It is far too easy to say that minorities have only themselves to blame for their wealth decline because they bought homes they couldn’t afford. That argument would let so many off the hook. It would excuse the government for its monumental failure to tame predatory lenders. And it would absolve the lenders who came up with exotic mortgages that should never have been pitched ubiquitously, especially not to financially fragile minority borrowers. But blaming the victim is what we do so well in America.

So let me get this out of the way:

There were people who took on too much home debt. And many should have known better.

Minorities, of course, were simply following the strategy that had been working for their white counterparts for decades. They were using their house to climb up the economic ladder because home equity was, and still is, the single largest contributor to household wealth. The path to middle-class status often starts with owning a home, with families diversifying their assets as their income grows.

Hispanics derived nearly two-thirds (65 percent) of their net worth in 2005 from home equity. It was 59 percent for black households. For whites, home equity accounts for relatively less of their total net worth — 44 percent in 2005.

White homeowners saw the median value of their home equity decline from an average $115,364 in 2005 to $95,000 in 2009. Black homeowners saw their values go from $76,910 in 2005 to $59,000 in 2009.

For Hispanics, the drop was even steeper, tumbling from $99,983 to $49,145 — about half. The Pew study noted that a disproportionate share of Hispanics live in California, Florida, Nevada and Arizona, states experiencing the biggest declines in housing values.

With the collapsed housing market come critics who want to blame the meltdown on federal policies aimed at boosting homeownership among minorities. It wasn’t the policies. It was the execution.

In 2002, President George W. Bush hosted a conference on minority homeownership at George Washington University. What he said then is still true today.

“Two-thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half the African Americans own the home,” Bush said. “That’s a homeownership gap. It’s a gap that we’ve got to work together to close.”

Close that gap, Bush said, and “our communities will be stronger, and so will our economy.”

Yet closing the housing and wealth gap is still going to require some good, well-executed policies out of Washington. Bush noted that the top barrier to increasing homeownership was coming up with a down payment.

Under the Obama administration, there’s a proposal to require a 20 percent down payment for families to qualify for the best mortgage rates. If they don’t meet this threshold, their loans would be considered more risky. Such a requirement would disproportionately affect minorities.

It wasn’t the lack of down payments that crippled the housing market. The fact is, lenders can and have made loans for years that perform well without people plunking down hefty sums upfront.

The Pew report is further evidence that we need to continue encouraging families to diversify their financial holdings. But at the same time, as a public policy, we should not abandon efforts to increase minority homeownership for financially stable families.

As that mother in Hughes’s poem reminds us, we ought to be encouraging people to keep climbing even though life ain’t no crystal stair.

Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Or e-mail: singletarym@washpost.com. Personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.

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