Dionne Walsh craves the chance to get her family of six out of their cramped two-bedroom Landover Hills apartment and into a home of their own. With stable jobs and combined incomes of $80,000 a year, she and her husband seem like prime candidates to make it happen.
But so far, legitimate lenders have been kept away by the debt the family accumulated after Walsh left her job in 2001 to care for her children, and the savings that evaporated while they got rid of the debt. The goal of buying a house, a move that Dionne Walsh, 33, believes will give her family long-term economic stability, has been frustratingly elusive.
"All the lenders are singing the same song at this point," said Walsh, who is black. "We're talking having to save anywhere from $5,000 to $10,000. It's a lot of money, but you don't have any choice."
Walsh's experience parallels a trend seen nationwide over the course of the 2001 recession and the sluggish recovery that has followed, as minority families lost significant ground to whites in terms of household wealth, according to a report to be released today by the Pew Hispanic Center. The widening wealth gap underscores the vast differences in the economic well-being of minority and white families, with minority families having far fewer assets to pay for such major expenses as retirement and college tuition despite strides in narrowing the income gap.
As of 2002, the latest year for which data are available, the median Hispanic household had a net worth of $7,932 and the median black family had $5,998, meaning that half of the households in those groups had less and half had more. The median white family, by contrast, had more than 10 times either amount -- $88,651. Nearly a third of blacks and over a quarter of Hispanic households had zero or negative net worth in 2002, compared with 13 percent of whites.
The net worth of Hispanic and black households fell 27 percent from 1999 through 2001, while white household wealth rose 2 percent during the same period, the survey found. The losses erased many of the gains blacks and Hispanics had made during the boom of the late 1990s, and they left them less of a cushion to ride out future downturns, according to the report. "The recession and jobless recovery had enormous costs," said Roberto Suro, director of the non-partisan Pew Hispanic Center. "They wiped out a lot of gains."
In 1999, before the recession hit, the median Hispanic household had a net worth of $10,495, the median black household had $8,774 and the median white household had $86,370, according to the center. That was a gain since 1996 for every group.
In 2002, white families' median net worth was up $2,281 from 1999 and $13,169 from 1996. Hispanic households' median worth stood at $7,932, $1,000 more than before the boom, but down from 1999. Black families had about $1,000 less than in 1996.
The report was based on Census Bureau surveys in which people were asked about their assets and their debts. Net worth, or wealth, represents the difference between the two. Asian American families were not included in the study, but Rakesh Kochhar, an economist at the Pew Hispanic Center and the report's author, said their wealth levels tend to be above those of blacks and Hispanics but below those of whites.
While black and Hispanic households earn about two-thirds as much money as white households, they tend to have a disproportionately smaller share of assets in the form of savings accounts, stocks, and, perhaps most importantly, homes.
"We have made some progress toward closing the income gap," said Lawrence Mishel, president of the Economic Policy Institute, a labor-oriented research organization. "It will take many decades, at the rate we're going, to make any substantial progress toward closing the wealth gap."
One major reason that gap has proven so intractable, economists and historians say, is that wealth begets wealth. It is easier to build wealth if a family already has assets that can make money on their own, such as a stock that pays dividends, a savings account that earns interest or a home that gains value. Owning a home was particularly important to maintaining wealth levels during the recession, when millions of people lost their jobs and the stock market sank, but real estate prices sprinted ahead.
Homes that appreciate in value give families growing equity that can be used to secure loans to send their children to college, cover emergency costs and provide a source of wealth that can be tapped in retirement or passed on to the next generation.
Although minority homeownership rates have been on the rise in recent years, fewer than half of blacks and Hispanics own their own homes, compared with nearly three-quarters of whites.
Among blacks, homeownership rates have been suppressed by a legacy of discrimination in the housing market that led many to buy in less-desirable neighborhoods and to accept deals at exorbitantly high interest rates that often led to foreclosure, according to numerous studies. The percentage of Hispanic homeowners is kept low by the steady stream of immigrants, who can take decades to build enough savings to buy a home after they arrive in the United States, Suro said.
Both groups are also hurt by a credit industry that targets them for high-interest credit cards and mortgages that prevent them from developing equity, said Elizabeth Warren, a Harvard Law professor and an expert on lending practices. "The credit industry has painted a bull's eye on the backs of blacks and Hispanics," Warren said.
Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association, disagreed. Blacks and Hispanics tend to pay higher interest rates, he said, because they also tend to have lower credit scores. "Mortgage rates are based on a person's credit risk, not on race," he said.
Suro said many blacks and Hispanics are "new to the game" of wealth creation, putting them at a distinct disadvantage because they have not had enough time to pass assets down from one generation to the next. At least among Hispanics, he said, wealth should begin to increase as the population ages, education levels rise and people migrate away from traditional immigration hubs such as New York, Los Angeles and Washington, where the housing prices are higher than in the rest of the country.
Homeownership "allows for a kind of intergenerational movement that's worked well for whites in this country," he said. "It's possible to see that kind of success in the long term for Hispanics as well. But right now, the trend lines are not in a positive direction."
In Walsh's case, she likes the way her own family's trend lines are starting to look. She is back at work. They have paid off their debt. And they are working with the Association of Community Organizations for Reform Now, a group that promotes homeownership among low- and moderate-income people, to get an affordable loan. Walsh, who is chairwoman of ACORN's Landover Hills chapter, has visions of buying a three- or four-bedroom house in Prince George's County next spring, giving her family a chance to spread out and allowing their wealth to begin to build.
"That becomes an asset. You have equity," Walsh said. "You become fairly stable. Or, at least, people think of you as fairly stable because you're a homeowner."