The Great Recession's Disparate Effects on Wealth
- The Great Recession's Disparate Effects on Wealth
Michael Grinstein-Weiss, Clinton Key, Shannon Carrillo
- Publication Date:
Homeownership remains a key component of the American Dream and households’ net worth in the United States. A study in Housing Policy Debate analyzed the effect that owning a home had on the wealth of households between 2007 and 2009. The researchers compared renters to owners, and explored the data to uncover how the economic downturn affected the wealth of different ethnic and racial groups. The downturn had a large impact because the value of a home tends to be a homeowner’s largest asset; on average, homeowners maintain only 5 percent of their assets in transactional accounts for emergencies.
- Compared to renters, homeowners were more likely to lose net worth, but less likely to lose 20-50 percent of their total net worth.
- Among households that owned a home and had a 2007 net worth in the lowest 20 percent, a home accounted for 70 percent of total assets.
- Between 2007 and 2009, homeowners lost an average of $30,000-40,000 in assets, roughly 10 percent of their total wealth; a third lost at least 25 percent of their assets’ value.
- White homeowners lost less than half as much home equity as households in other racial and ethnic groups.
- African-American homeowners were significantly more likely than any other ethnic or racial group to lose a large portion of their wealth; one half of African-American homeowners lost at least 25 percent of their wealth, with a third losing at least 50 percent of their wealth.
- Compared to African-American homeowners with similar housing debt amounts, white homeowners boasted $140,000 more in net worth and twice as much in liquid assets.