The Federal Reserve’s report on family wealth released last Monday illustrates how severely the Great Recession has hurt middle-class families. Median family net worth (assets minus debt) fell to levels not experienced since 1992. While all groups but the richest 10 percent of families saw declines in wealth, there was variation in the percentage decline by race.
In the Federal Reserve’s report, it is difficult to identify the specific trends for African Americans and Hispanics. While the net worth of white, non-Hispanic families are presented, all nonwhites and Hispanics are lumped together in the family net worth table. However, the report has a sentence detailing the net worth changes specifically for African American families (p. 21). By using the past few reports, we can see the recent trends for wealth in black America.
First, it is important to note the median black family only has a small fraction of the wealth of the median white family (Figure A). (The family data discussed here differs from our reported household data because families are a subset of households and the data are inflated to different years.) In 2010, the median black family only had 12 cents for every dollar of wealth the median white family had.
When one examines the percent decline in wealth from 2007 to 2010, it appears that whites have seen a greater percentage decline in wealth than blacks. White family net worth declined 27 percent over this period while black family net worth declined 13 percent (Figure B). But in the data, while white wealth peaked in 2007, black wealth peaked in 2004. As white wealth continued to grow from 2004 to 2007, black wealth had already declined significantly.
If we compare the white and black wealth declines from their most recent high points, we see white net worth down 27 percent (from 2007) and black net worth down 40 percent (from 2004). A 40 percent decline is a large drop for a population with very little wealth even at their peak.
The trend for black net worth is probably following the trend for black homeownership. For most middle-class families, their home is their primary source of wealth. African Americans have had a strong decline in homeownership since their rate peaked in 2004 (Figure C). Homeownership rates for black families are projected to drop to between 40 and 42 percent—which would erase 15 years of gains in homeownership. If this occurs, it could also mean a continued decline in black wealth.
It is not possible to determine the trends in Hispanic net worth precisely from the published Federal Reserve data. We can deduce, however, that from 2007 to 2010, Hispanic net worth probably declined about 45 percent. This decline is significantly larger than the 27 percent for whites over the same period. Even at their recent peak net worth, Hispanics, like blacks, only had a tiny fraction of the wealth that whites had. (In 2010, the median family for nonwhite and Hispanic families combined only had 16 cents for every dollar of wealth the median white family had.)
In terms of wealth, only the richest American families have come out of the Great Recession relatively unscathed. Significant declines in wealth have been broadly felt. But the losses to black and Hispanic families are particularly damaging because they are quite large, and they were experienced by groups that had very low levels of wealth even before the recession hit.
— Research assistance provided by Johnny Huynh