In a briefing paper titled Reversal of Fortune, the Economic Policy Institute details how the economic gains made by African Americans in the 1990s were overturned during the Bush era. The paper is required reading.
One of the more striking examples of black America’s economic downturn is the depressed rate of black home ownership as a result of the subprime mortgage crisis.
Source: Economic Policy Institute
As described in the paper, we may be seeing a historic loss wealth of black wealth that could continue into next year:
For most Americans, their home is their most important source of wealth. From 2000 to 2004, it appeared that African Americans were making progress in wealth-building. The home ownership rate for African Americans increased from 47.2% in 2000 to 49.1% in 2004. But this increase was short lived. In 2007, the black home ownership rate was back down to its 2000 level of 47.2%.
African Americans were disproportionately involved in the subprime mortgage market and those mortgages have had a high rate of foreclosures. Many subprime mortgages were made to refinance existing loans, and thus it is not only homes purchased during the housing bubble that are at risk.
Since the foreclosures have continued into 2008 and will likely continue into 2009, the African American home ownership rate is also likely to decline into 2009.
The impact of the housing crisis extends to African Americans who were not subprime borrowers. Home owners who merely live in communities with a high rate of foreclosures will likely see the value of their homes decline. High levels of foreclosures lead to increased vandalism and crime and declining tax revenues for communities. Renters who are renting a foreclosed property face possible eviction.
When one calculates the combined effect of all of these wealth-sapping factors, it is clear that we are witnessing a historic loss of wealth among African Americans.
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